Overhaul of pension scheme in the offing

The government will form a pension authority within next two years to oversee the pension scheme for the private sector.

It may also bar the retired government staff from selling more than 50 percent of their pension benefit from next fiscal year. 

The decision was taken at a high level meeting yesterday at the secretariat with Finance Minister AMA Muhith in the chair.

After the meeting, Muhith told reporters that many government officials sell their pension benefit at a time, due to which they face many problems later on.

None will be allowed to draw more than 50 percent of his/her pension money at a time, the minister said. The rest of the amount can be drawn every month in the course of his/her life.

In his budget speech earlier in June, Muhith said the existing pension system would be reformed and an initiative would be taken to introduce a pension system in the private sector.

At yesterday's meeting, the finance division presented a concept paper about the initiative, and it was decided that a proposal in this regard will be placed in the cabinet meeting, said a finance ministry official.

The government will introduce a universal pension system for both public and private sector employees, according to the concept paper.

For this, several subsidiary institutions will have to be established, including pension enrolment office, pension trust, custodian, central record keeping agency, trustee bank, pension fund managers and annuity service providers.

A new pension office will be established for reforming the existing pension system.  Besides, a pension cell will be formed in the finance division for preparing a revised draft law for the pension scheme.

A pension authority will be formed to bring all the citizens under the pension scheme.

In the meeting, the finance division said the joint families formed over decades have been disintegrating into nuclear families due to continued urbanisation.

Providing social safety to the elderly people has taken an alarming turn, said the finance ministry. As a result, the responsibility of providing fundamental security to them has gradually been transferred to the state.

The meeting discussed that the private sector jobholders will primarily make a voluntary contribution to their pension fund, which will be provided to them in future.

If a person resigns from an organisation and joins another, his contributory fund will continue uninterrupted.

Changes will be brought in the pension system for the government staff, most likely from next fiscal year.