India, Pakistan to share pension reform plans with BD

Bangladesh will be shared with experiences of India and Pakistan regarding modernisation of civil service pension payment system as the country is outlining a related World Bank project. The two South Asian neighbours will present their experiences tomorrow at the finance ministry office in Dhaka. World Bank and finance ministry officials will be present. Finance Division officials said an outline of the World Bank project will be finalised soon while experience sharing of India and Pakistan is part of the project outlining work. Bank and Financial Institutions Division had earlier discussed with the global lender about the $100m civil service pension payment system reform project. In the initial discussions, the two sides planned the three-year project titled “Bangladesh Insurance and Private Pension Market Development.” They also discussed that the project will be funded by the World Bank and the Bangladesh government. The multilateral lender will provide $80m and the government will bear remaining $20m, said a finance ministry official, adding that the project is likely to get the nod from the Prime Minister’s Office and later it will be placed at the World Bank board. After the lender’s approval, the Bank Division of the Bangladesh finance ministry will formulate a law on functioning of the scheme. The local business leaders said steps should not be taken to implement the proposed scheme and amend labour law of 2006 without talking to stakeholders. They said necessary funds would be injected into the scheme as a total of 181,000 firms had been registered under the Office of the Registrar of Joint Stock Companies and Firms. Of the total firms registered with the Office of the Registrar for Joint Stock Companies and Firms, 71% are private and public companies and 22% are partnership firms. Earlier, the Ministry of Finance submitted a proposal before Prime Minister Sheikh Hasina on the planned reform of the existing pension scheme. The PMO holds the authority to approve or disapprove of the proposal or to suggest any amendment, If approved, the plan is likely to take effect in the next fiscal year. The Finance Division in its submission proposed that the annual increment on the monthly pension payments should be executed in different ratios for different graded employees. As proposed, for the employees graded 9th to 20th the annual increment should be 6.0%, for 3rd-and 8th-graders 5.5% and for those above 3rd grade it should be 5.0%. The proposed pension reform would bar the retiring public servants from withdrawing more than half the gross pension money at one go. The remaining half would be retained and paid on monthly basis with annual increments. Currently, some 36,000 government employees go on retirement every year while total pensioners are 550,000. Some one-fifth of them now draw the entire amount immediately after their retirement, said the official, revealing a ministry of finance survey result. The division in the survey found that the proposed reform, if carried out, would help reduce the government’s annual spending worth around Tk800 crore on pension payment, if it is implemented from next fiscal year. The government has allocated Tk19,471 crore for the payment of pensions in the next fiscal year.