Infographic: TBS
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Infographic: TBS
The government plans to launch a universal pension scheme across the country in July, with individual contributions ranging from a minimum of Tk 500 to a maximum of Tk 5,000 per month.
Individuals over the age of 50 can also enroll in the scheme, but must pay premiums for 10 years to qualify for the pension, according to a finance ministry official.
The scheme will initially cover four categories: private sector employees, non-resident Bangladeshis, informal sector individuals and bankrupt individuals.
Officials said individuals living below the poverty line are classified as bankrupt and the Treasury Department is currently analyzing how to identify them. Very poor government beneficiaries may also fall into this category. And their monthly contribution is likely to be set at Tk 500.
The informal sector will include people from a variety of occupations, including rickshaw drivers, domestic workers, street vendors, and hawkers.
Contributions for non-resident Bangladeshis and informal sector individuals range from a minimum of Tk 500 to a maximum of Tk 5,000 per month.
Monthly contributions for private sector employees may be set from a minimum of Tk 1,000 to a maximum of Tk 5,000.
The government contributes 50% of the bankrupt’s monthly deposits and nothing else.
Pension plan participants receive interest from the government on their contributions.
The interest rate has not yet been finalized, but officials said it would be higher than bank deposits but slightly lower than typical savings bonds.
Treasury officials said the ministry was working on setting the interest rate. In addition, we also conduct separate examinations with certified public accountants. They said the interest rate will be finalized soon.
The scheme is open to individuals aged 18-50 and over. Under related laws, people over the age of 50 were not eligible, but later rules were established to include them under certain conditions.
According to the rules, people over the age of 50, like everyone else, cannot receive a pension from age 60. Instead, after 10 years of contributions, you will begin receiving a life annuity. In other words, if you join at the age of 60, you will start receiving your pension at the age of 70 after paying premiums for 10 years.
Officials said preparations were underway to launch the scheme on the first day of the new fiscal year.
Prime Minister Sheikh Hasina will start a universal pension, and the Ministry of Finance has already asked the prime minister for the schedule. Once she confirms her timing, the universal pension system will officially start nationwide.
Treasury officials said the comprehensive pension scheme aims to provide financial security to a wide range of people, promote social welfare and ensure economic stability.
“There is no trial operation of the universal pension. We will announce the launch, including “we will incorporate it into the plan and hold a ceremony,” said an official involved in the process.
Regarding the inclusion of people aged 50 and over in the system, an official from the Ministry of Finance said, “Recommendations continue to include elderly people from various levels. Provisions have been made to include these people,” he said. However, senior citizens can receive a pension after contributing for 10 years. ”
Those enrolled in the universal pension plan will initially simply deposit their contributions into the state-owned Sonali Bank. To this end, the Pension Authority, Finance Department and Sonali Bank completed preparations for signing a memorandum of understanding this month. Later, other banks will also join the system.
Initially, the government will make strong efforts to increase the participation of expatriates in the universal pension system. The Treasury Department hopes that expatriate contributions of foreign currency from abroad will ease the ongoing dollar crisis.
In the other three products, participants donate Bangladeshi currency and the government invests the currency in profitable projects. Officials expect the government’s reliance on bank loans to decline significantly over the next few years.
They said the government will only receive contributions to the universal pension for the first 10 years and will not have to pay any money during this period. After 10 years, the money will be used for pensions.
Asan H. Mansour, executive director of the Institute for Policy Studies, told Business Standard, “The introduction of a universal pension system will certainly give the government an opportunity to easily spend money, because this “There can be a lot of money in the system,” he said.
“But it won’t happen in one or two years. It will take three to five years for this system to take shape. In that case, we need government bonds.” It can be one of the investment instruments. ”
The economist said the government could raise funds through bonds to carry out various development activities. But it also has risks. For this, it is necessary to first establish an institution and draw up strict rules and regulations. This is to ensure that the money deposited in the pension fund is not misused or wasted.
Mud Habibur Rahman, chief economist at Bangladesh Bank, told TBS, “There will be a lot of money deposited in the universal pension scheme at one time. The government will be able to borrow from it. Pension funds will be easier to invest. will be,” he said. It will also reduce the demand for government loans from the banking system. ”
He said that when the government tried to borrow from savings vehicles, people bought far more savings vehicles. As a result, the government will borrow less from the banking system.
He added that the universal pension fund would have a positive impact on development activities and exchange markets.
Treasury officials said the universal pension product was developed for civil servants and those working in self-governing institutions. The government so far has not launched these two products. At present, civil servants receive pensions from the government, and officers and employees of autonomous institutions and state-owned enterprises receive honorariums and other benefits.
Officials of the Finance Division said that the universal pension system has been introduced in such a way that people can change the product or system if they wish, even after joining. That is, after an expatriate subscribes with a fee of Tk 500, he can increase the subscription fee later if he is interested, and can switch to private or informal sector products upon his return.
Also, individuals participating in the scheme in the bankruptcy category can switch from both products and contributions if their financial situation improves.
Officials said the finance ministry will announce when the two products will be introduced for government employees, self-governing bodies and employees of state-owned enterprises when the universal pension system is launched in July.
From that point onwards, those who become civil servants or work for self-governing or state-owned enterprises will no longer receive pension benefits from the government. Those who join the service after that time will be included in the system like everyone else and will receive a pension under the Universal Pension Scheme.
Officials did not provide specific information when asked from which year civil servants would join the universal pension system. He said the decision would be finalized according to directives from the highest level of government. However, it may be fixed around 2031.
The Ministry of Finance plans to appoint a chairman of the authority by next July for the smooth operation of the universal pension system. If a chairman cannot be appointed within this period, an additional Secretary of the Treasury will act as chairman.
The Universal Pension Service signs Memorandums of Understanding (MoUs) with various state agencies to introduce a universal pension.
A draft memorandum has already been completed. To sign these memorandums and expedite the functioning of the Pensions Authority, a committee was set up from the Ministry of Finance, chaired by an additional Secretary.
The Finance Department and the Pension Department will also sign a Memorandum of Understanding with the Bangladesh Bank to ensure the timely remittance of pension contributions deposited in the bank to the State Treasury.
In addition, memorandums of understanding will be signed with the Electoral Commission and the Birth and Death Registration Office. Citizen information is stored in these two organizations. This memorandum is made to facilitate verification of various information, including age.
In addition, the finance department is preparing to sign a memorandum of understanding with the passport office to make it easier for expatriates to enroll in the pension scheme.