No sooner had Prime Minister Sheikh Hasina inaugurated the Universal Pension Scheme than the bloggers and online critics began frantically criticizing such a maiden initiative. Their arguments and screaming are meant to make citizens believe that the money being paid to the Scheme would be plundered. Against the backdrop of thousands of crore takas’ laundering to various Western countries during the last two tenures of this government and defaulting bank loans, such apprehension is not their simple ventilation on social media but warranted explanations by the authorities concerned.
Pension schemes are complex and incredibly demanding as the fund size eventually gets gigantic amid challenges galore at a time when Bangladesh’s demographic time bomb has set off an intense debate.Citizens have been experiencing a lack of good governance and dysfunctional institutions across the countrywhich have turned them very ‘protective’ to safeguard their hard-earned money.
Keeping aside those social media worries—at this moment—let us first ask is it truly a Universal Pension Scheme?
According to an ILO policy brief (July 2022), to achieve universal pension coverage at adequate benefit levels, countries need to establish and maintain public social security systems that are aligned with the ILO multi-pillar pension model. Now, Pillar 0 (the social protection (pension floor) and Pillar 1 (social insurance) are essential to prevent older people from falling into poverty while progressively achieving universal pension coverage and higher levels of protection. In many cases, these fundamental components are complemented by Pillar 2 (complementary schemes) and Pillar 3 (voluntary personal savings) for individuals with higher contributory capacity. Pillar or Tier zero is where unable people do not contribute to the pension scheme at all yet they are entitled to the benefits when they grow older. Bangladesh’s Universal Pension Scheme does not have such provision. These are the most vulnerable section of any country’s population.
The prime purpose of the universal pension scheme is to bring all the constituents above 18 under its coverage and let them enjoy a lifetime pension facility as they turn 60.
Four different packages have been launched. Those are named Pragati, Surokkha, Samata and Prabash.
The Pragati package is to cover private job holders, while the Surokkha is meant for self-employed persons, the Samata for the low-income people and the Prabashone is for the expatriate Bangladeshis. The two more packages will be launched later.
According to Bangladesh Awami League website albd.org, by enrolling in the scheme at 18 years of age, private sector employees or expatriates can receive benefits 12 times greater than their 42 years of contributions.
For example, if an expatriate starts contributing Tk10,000 per month under the Probash Scheme, his/her total contributions to the scheme would amount to Tk5,040,000 by the age of 60. With a monthly pension of Tk3,44,655 from age 60 to at least 75, the accumulated sum would reach Tk62,037,900, which is around 12.31 times than their total contribution.
Under the Progoti Scheme, a private sector employee paying Tk5,000 per month would amass a total deposit of Tk2,520,000. By age 75, their government pension would amount to Tk31,018,860, representing 12.31 times their total deposit.
If the pensioner dies before 75, the nominee will receive the pension at the same rate until that age.
Stakeholders say the public pension system will function as a government revenue source as the authority will receive a premium for the initial 10 years. During this period no pension will be paid. The government will invest these funds in profitable sectors.
Somota scheme for the ultra-poor:
Here, with a subscription rate of Tk1,000 per month, the contributor pays Tk500 while the government covers the remaining Tk500.
Individuals unable to meet their basic living expenses with their own income and, therefore, fall below the extreme poverty line as per the Household Income and Expenditure Survey by the Bangladesh Bureau of Statistics, are eligible for inclusion in this scheme.
Under the scheme, enrolling at 18 and contributing Tk500 monthly yields a Tk34,465 pension from age 60. For citizens aged 50 and above, contributing Tk500 monthly for a minimum of 10 years results in a Tk1,530 monthly pension.
Problems:
No matter how much money the beneficiaries accumulate in the UPS, all they need when they grow older, is various consumable products and services. Mere money would not bring happiness to them. They would need healthcare, good and nutritious food, social engagement, respects and dignity.
They country needs various old-age facilities, special hospitals and care systems for the ensuing elder population. People living single are more vulnerable. As extended families are becoming extinct and nuclear families emerging caregiving to the senior citizens getting important day by day. These senior citizen will need to staymobile, getting personal care, managing their medical care, getting proper nutrition and exercise and engaging in activities and recreation
As far as my knowledge goes, Bangladesh does not have any special hospital system for the senior citizens. Some of the senior citizens may need special privacy than others. Therefore, constructing special-care wards or hospitals are must.
According to the World Health Organisation’sAssessment of Healthcare Providers in Bangladesh 2021, geographical and skills imbalances in medical care systems are longstanding concerns in Bangladesh, with distribution skewed towards urban areas for many occupations, particularly for doctors.
For example, 35% of the physicians and 30% of the nurses are serving 15% of the total population living in fourmajor cities of Bangladesh including Dhaka, Chattogram, Rajshahi, and Khulna. And, unfortunately, less than 20% ofhealth workers serve over 70% people living in rural areas. Deploying health care providers to the rural and remote areas where most of the poor live, remains an ongoing challenge.
Not only that, in 2020, the country had a density of 9.9 doctors, nurses and midwives per 10 000 people, a figure much lower than the universal median of 48.6.
What to Do?
The Universal Pension Scheme is a newborn organization in Bangladesh. Considering its coverage, people who may get involved, this will be a Super Mega Institution in Bangladesh. It will have giant fund, so many complexities of accounting and accountability, risk management and Financial Fund Management systems. As people are readying them for discarding a portion of the current consumption for future consumption smoothing, their entitlements must be respected and well-served.
To run UPS smoothly and with efficiency, the authority needs certain expertise, such as Actuaries, Investment Managers, Risk Managers, Legal and Compliance Managers, Communication Specialists, Financial Analysts, Data Analysts, Compliance Auditor and Economy and Market Researchers.
The actuaries analyze the financial costs of risk and uncertainty. They do mathematics, statistics, and apply financial theories while assessing the risk of potential events. They help businesses and clients develop policies to minimize the cost of that risk. Actuaries’ work is essential to the any Pension Scheme.
As the fund matures and time comes to serve the beneficiary, various complexities may arise. The employee must be honest. The first problem will be adjusting the rate of inflation with the annuities. This is knows as indexing. They way Bangladesh is offering UPS, there lacks an indexing, which means the authority will not estimate the inflation to offset the clients accordingly. Therefore, most of the scheme is of ‘Defined Benefit’ type.
In many countries, government or authorities may lag behind while paying the claims to the clients. Citing figures, a popular UK business magazine, “Corporate Adviser,” said in May that the state pension underpayments amounted to £670m for the 2022/23 year — significantly higher than the £540million that was underpaid the previous year.
The data also shows that six in every 100 new state pension claims received underpayments in the 2021/22 year.
It is worth citing here that old-age pension schemes should achieve the multiple objectives of preventing poverty in old age, providing income-smoothing over the life cycle and securing an adequate standard of living for people after retirement. This objective connotes the ILO social security standards and theUnited Nations Sustainable Development Goals (SDGs), particularly SDG target 1.3. To ensure income security for older people, public pension schemes need to be placed at the heart of any social security system and they should operate through a combination of rights-based mechanisms.
Conclusion: Since the clients will be sacrificing a part of their current consumption for accruing future benefits, the economy must raise sufficient productions and services for those people in the near future. The government must ensure good governance in banking and financial sectors to attract clients. They must address any mismanagement and manual data entry to stay transparent and honest. The authorities must address any ambiguities, bribery, practice of corruption and nepotism before they happen to occur. To run the UPS under strict legal obligation, democracy in the country will be the prerequisite.
Govinda Shil is a free-lance journalist
