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Pension for all: CPD proposes framing institutional set-up, legal reforms

  • Published at 07:31 pm November 6th, 2019
Planning Minister MA Mannan addresses a discussion at a hotel in Dhaka on Wednesday, November 6, 2019 Mehedi Hasan/Dhaka Tribune

'As far as I know, we have a small cell inside the Ministry of Finance which has already started the groundwork keeping this issue in view'

The Centre for Policy Dialogue (CPD) yesterday recommended that the government should introduce a universal pension scheme (UPS) for all people aged 65 years and above.

The CPD proposed a monthly pension of Tk1,853-2,264 for the age group. 

It said the number of ageing people over 60 years in the country was 12.6 million (8% of total population) in 2017, which would increase to 20.7 million (11% of total population) by 2031 and 42.3 million (20% of total population) by 2051.

The government, placing the current budget, had pledged to roll out pension for all, it reminded.

The CPD proposals include institutional framework, reforms in relevant laws and enactment of a number of new policies before enforcing the UPS. 

It said the country would require an additional 2-3% gross domestic product (GDP) equivalent to tax money to meet the huge liability of the proposed UPS. 

The country's current tax-GDP ratio is as low as 10% while the government's public finance management reform strategy for the period of 2016-2021 envisages to raise the tax-GDP ratio to 14% by 2023. 

“If this target is reached, it will provide fiscal cushions for introducing a UPS in Bangladesh,” said Prof Mustafizur Rahman, distinguished fellow of the CPD, in his key-note presentation titled ‘Introducing a Universal Pension Scheme in Bangladesh: In search of a Framework’ at a dialogue in the city.

The dialogue was held at a local hotel in the capital. CPD, jointly with the Oxfam in Bangladesh, organized the event.

Mustafiz said the country’s dual graduation journey from a least developed country to a developing country, and from a low-income country to a lower-middle income country entailed a need to design and pursue policies that were commensurate with the growing expectations of its citizens for better social welfare and for a economically secured life.

He informed the dialogue that more than 40% old-age (65+) population in the country now did not receive any kind of pension. 

Among the current number of pension beneficiaries, 7.6% were retired government employees and 10% private sector employees who received some sorts of gratuity or provident funds and another 39.9% received old age allowance, he added.

In his presentation, Prof Mustafizur said the UPS financing also might come from defined contribution (DC) during the employment period of private sector service holders. Each employer would open a Retirement Pension Account (RPA) for employees and would collect and make contribution on employees’ behalf, he added.

According to the CPD proposal, a 15-member committee, headed by Upazila Nirbahi Officer, has to be formed for implementing the UPS at each Upazila. 

The proposed committee will finalize the number of beneficiaries and ensure the delivery of non-contributory pension scheme to recipients’ bank accounts, it adds.

The proposal says upazila chairman will act as the advisor of  the committee to monitor the overall implementation of the pension programme.

Prof Mustafiz said a total 186 out of 192 countries had at least one pension scheme in place for their elderly citizens.\

In response to the CPD proposal, Planning Minister MA Mannan said the government wanted to introduce pension for all the old age people and already started works to this effect. 

"Knowingly or unknowingly, we entered the 'pension for all' scheme. It is comfortable for the government to know that already 50%-60% old age people are covered by pensions in various ways,” said Mannan.

The minister said all might not take part in the pension scheme as 11-12% people were still living in extreme poverty having no basic income.

Dr Zahid Hussain, former lead economist of the World Bank, said the CPD's proposal of introducing UPS gave an inspirational framework to begin with the scheme.

Zahid Hussain suggested that the proposed UPS would require thoughtful planning before the government embarked on the journey.

"Once a pension scheme is introduced, it will involve number of critical issues. There may be a chance to fall into a trap in the future because of associate financial burden and absence of precautionary measures centring the reforms of laws, duplication of laws, building institutional capacity and its financing," he said. 

He said the pension coverage beneficiaries now would not be more  than 10% of working age population.    

Zahid said poverty gap must be reduced as a mainstream objectivity of the UPS.  

Former finance minister M Sayeduzzaman said financing pension schemes would require the introduction of provident fund system by private firms.

"Unless the corporate tax rate is revised, listed and non-listed companies will not be able to allocate funds within the existing system," he said. 

CPD's trustee board member and distinguish fellow Debapriya Bhattacharya moderated the dialogue. 

Abul Kalam Azad, MP, chairman, Parliamentary Standing Committee on Ministry of Planning, Towfiqul Islam Khan, senior research fellow at  CPD, and Mostafa Amir Sabbih, senior research associate at CPD, and Dipankar Dutta, country director of the Oxfam International Bangladesh, took part in the discussion.

The event was attended by economists, development practitioners, academicians, researchers, international development partners, private sector service holders, retired government employees and media officials, among others.

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