Govt designing a pension scheme for private sector
The government will introduce a mandatory pension scheme for the private sector under the new National Social Security Strategy (NSSS) that was announced last week by the planning commission.
The cabinet has already given a timeframe to the banking division of the finance ministry to prepare a modus operandi for the scheme, said Shamsul Alam, member of the General Economics Division of the planning commission.
The first tier would be the citizens' pension scheme: senior citizens belonging to the poor and vulnerable group and above 60 years of age will receive Tk 500 per month and those of 90 years and above Tk 3,000.
This form of pension scheme is already in place but the government plans to extend it further under the new system.
The second tier involves a contributory pension scheme for the formal sector workers -- and is a new concept that the state is exploring.
It would provide pensions and address other contingencies such as disabilities, sickness, workplace accidents, unemployment and maternity.
Initially, it would be aimed at those in the formal sector from whom contributions can be collected relatively easily on a mandatory basis but will gradually be extended to the informal sector.
At the start, the fund will be managed by the newly formed Insurance Development and Regulatory Authority under the finance ministry's banking division.
The third tier would be a voluntary pension scheme, which people can opt for if they want an additional income in old age -- and would be managed by the private sector.
This tier would encourage growth of private and employment-based pensions, according to the NSSS document.
The process will start by the commissioning of a study of the current private pension schemes to make recommendations on how to encourage growth of private pension scheme and ensure security of investments by the members of such scheme.
The banking division will conduct the study, which will examine the viability of establishing a pension regulatory authority that will be responsible for supervising private pensions, thereby ensuring their integrity, fairness and financial sustainability.
Although the government has given the nod to the proposed three-tier pension system in principle, it will take some time for implementation as it is a complex process, Alam said, adding that a tentative deadline of 2018 has been set to complete the whole process.