Finance Minister AMA Muhith is likely to place the draft of the national pension scheme before a Cabinet meeting in the first week of December, despite shortcomings of the universal pension scheme regarding investment of its funds in the local stock, bond and securities markets, an official said.
Furthermore, there are concerns regarding the choice of chief executive officer (CEO) for the universal pension scheme authority, as officials with the requisite expertise are not easily available in the country, the source added.
Acting finance secretary Mohammad Muslim Chowdhury told the Dhaka Tribune: “We will bring the draft of the national pension scheme before the cabinet at a meeting in the first week of next month [December].”
The national pension scheme draft to be placed before the cabinet has two parts. The first part concerns the improvement of the Civil Servants Scheme, and the second part is regarding the implementation of the universal pension scheme, through which private sector staff may reap benefits.
“Currently, 1,580 civil servants under the Ministry of Finance have to go through a lot of hassle to receive their pensions, going to the office of the accountant general or a commercial bank. Through the improvements to the civil servants scheme, we aim to make it so they can avail pension facilities straight from their home,” the acting finance secretary said.
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“With the new scheme, pensioners will receive monthly payments through bank or bKash accounts even if they are living in Bhurungamaru upazila of Kurigram,” he added.
Regarding the second part of the draft, Mohammad Muslim Chowdhury said that an authority would be formed to govern the universal pension scheme. “Labourers, taxi drivers and rural people will deposit Tk100 per month to this authority through bank branches or bKash accounts, and the pension authority will keep electronic records of these private sector pensioners against their national IDs.”
However, the acting finance secretary said that a major problem of the universal pension scheme was on how to handle the funds.
“India is facing a similar problem, where they cannot find secure stocks or bonds in which to invest a portion of the pension scheme funds.”
According to the Indian private sector pension authority, 20% of the pension fund is supposed to be invested in blue chip stocks of the Indian stock market.
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“The problem is that, in Bangladesh, we do not have a large number of blue chip stocks in which we can invest the funds,” Muslim Chowdhury added.
According to Ministry of Finance sources, the lack of a place to invest money from the universal pension fund may pose a significant challenge, as Tk100,000 crore could be raised within just a few years of running the fund.
The security of the Bangladeshi stock market in general was also an issue, as a large portion of the government funds invested in the market over the last 20 years were taken out by corrupt individuals, the sources added.
Former FBCCI president Kazi Akram Uddin Ahmed told the Dhaka Tribune that it would not be possible to implement the proposed scheme without talking to stakeholders and bringing an amendment to the Labour Law of 2006. He said the government also needs to inject necessary funds into the scheme.
Last year, the finance minister filed a report on the shortcomings of private sector pension funds, primary among which was that insolvent firms are unable to pay back their staff on their contributory pension funds.
According to the report, an absence of government monitoring and pension management along with the absence of a law regarding private sector employees are the main obstacles to private pension funds.
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In the absence of a guideline and a law, the tendency of the owners of private sector firms is to use the money contributed by employees for the pension fund for other purposes. There is no opportunity and provision to use the private sector provident and pension funds in the country’s investment arena, the report revealed.
There is no opportunity to transfer provident funds and pension money to another employer when a private sector worker gets a new job, the report said.
Earlier, Finance Minister AMA Muhith had said: “Our main goal will be to bring private sector employees under a national pension scheme.
“We are preparing a law within six months, in which the private sector will come under that pension scheme and we hope that a private sector pension scheme will be implemented within two years.”
A total of 181,000 firms are registered under the Office of the Registrar of Joint Stock Companies and Firms. Of these firms, 71% are private and public companies and 22% are partnership firms.