Observation on the draft National Pension Authority Act
After paying a certain amount as deposits for 10 consecutive years under the Universal Pension Scheme, from 60 years of age and onwards, the individuals will be provided with a pension against the accumulated deposits. The spouse of an eligible pensioner will enjoy pension benefit if the pensioner dies at 75.
The government has published the draft National Pension Authority Act, 2022 and proposed a self-contributory pension scheme for citizens within age ranging from 18 to 50 years having National Identity Card (NID) and living in home or abroad. After paying a certain amount as deposits for 10 consecutive years under the Universal Pension Scheme, from 60 years of age and onwards, the individuals will be provided with a pension against the accumulated deposits. The spouse of an eligible pensioner will enjoy pension benefit if the pensioner dies at 75. If any pension scheme holder dies before paying subscription for at least 10 years, they will get their deposited money with interest.
As per the draft Act, no one will be able to withdraw their deposited money under the scheme but will be able to draw 50 per cent as loan against the deposit and the repayment of the loans will be deposited to the pensioner account.
Bangladesh already has pension schemes for personnel of civil, military, and autonomous bodies. The Provident Fund Act 1925 is for the pension of the government employees. There are some rules under the Act such as General Provident Fund Rules, 1979 and the Contributory Provident Fund Rules, 1979, the Government and Autonomous Bodies Employees Benevolent Fund and Group Insurance Rules, 1982, the Financial Institution Act, 1993 (for employees of the government and autonomous bodies including nationalised banks). The proposed scheme excludes the employees of government, semi-government and autonomous organisations from the scheme until the pension authority, i.e. the government issues gazette in this regard.
As per standard practice, there are three pillars in pension schemes practices in different countries: (1) Non-contributory (basic pension) (2) Contributory (forced savings) (3) Contributory (voluntary savings). Bangladesh already has basic pensions for civil and military personnel's non-contributory basic pension and the proposed scheme is voluntary, self-contributory (but not forced savings) scheme for common citizens.
The first pillar is an anti-poverty pillar that is non-contributory and guarantees a minimum income in old age. The second pillar is a forced savings pillar that provides benefits only to contributors, and, in general, provides the most benefits to those who contribute the most. The two mandatory pillars differ only as to whether benefits are flat, or related in some way to contributions. The third pillar is a voluntary savings pillar, available to anyone who cares to supplement the retirement income provided by the first two pillars.
The first pillar protects the elderly from absolute poverty and the latter two pillars protect them from relative poverty who can contribute at a working age but need support at old age. The primary proposal is somewhat similar to the second pillar except that the participation is voluntary. Bangladesh may consider introducing all three pillars in the pension scheme in due course.
Regarding management, the authority of the scheme will remain completely under government control and not an independent authority and audited by Comptroller of Auditor General of Bangladesh (CAG). There is a possibility of corruption and mismanagement in the authority. The account should be audited by an independent auditor and not the CAG. It should be an independent authority / trust and independent from government control for efficient performance.
As per the proposed law, under section 11 (ga), the employees of the government and autonomous bodies will remain out of this scheme since they already enjoy the benefits. There is no clear indication whether government has a plan to unify all the pension schemes under a single law: unifying Provident Fund Act 1925 and the draft National Pension Authority Act, 2022 for some Universal Pension Schemes (such as 3 pillars schemes) for all citizen irrespective of employment. This will be a welcome decision for fair distribution of benefits to all the citizens irrespective of profession to make Bangladesh a real welfare state.
The writer is a legal economist.