Premature Pension Scheme

Pension scheme about to start its journey Govt has yet to fix pensioner’s money. Past experience with savings certificate May hamper pension fund's target.

Nitty-gritty of the universal pension bill has gradually been revealed. Govt has decided to launch it from July 01. Bangladeshis aged between 18 years and 50 years are eligible to take part in this scheme. Govt has yet to form a National Pension Committee to manage the fund.After that quasi-state and independent organizations could take part in this scheme. According to a news report,lowest monthly fee could be Tk 500.The monthly amount will fetch Tk 60 billion per year¹. But ministry of finance hopes to form an annual pension fund even bigger than that because those who can pay more could eventually pay a fee more than Tk 1000/Tk 2000.

One of the good things about this pension scheme is that participant could draw credit of upto 50% from this fund if participant needs to use pension fund before maturity. In my January 27 piece titled “Universal Pension Bill: Could It Really Take Off?” I argued that raising savings through pension fund may not go as smoothly as govt intended at the initial stage.

As deficits get bigger and bigger,our output will be lower. Our major markets across the globe are in recession.So our savings will be lower in the future². Household's ability to spend will deteriorate further in the wake of inflation, loss of income and further fall of taka. So how many of the people outside institutional job market will take part in this program is a matter of serious scrutiny²

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People’s experience with national savings certificate is not good. Inflation made them net loser at the end of the day. Sloppy management of the economy is also to blame. So pension scheme may not create the enthusiasm among people.

It is interesting that govt has not fixed yet the amount it will pay to the pensioners but fixed the contribution amount. It somehow calls into question cash-strapped government’s intention.

Earlier govt planned to float Bangla Bond/sovereign bond in the London Stock Exchange.Corona threw cold water into it. Govt earlier also instructed quasi-state and independent organizations to disclose funds at their disposal.Interestingly, many quasi-state organizations like BPC withdrew their funds from some problem ridden banks, weakening further portfolios of the banks. This indicates the level of confidence people and organizations have on govt.

Govt is pretty determined to emulate the West except the accountability and moral standard. Govt earlier had changed Bank ownership act(later fixed to unlock IMF credit) citing example of the USA where family members own a bank and many banks with one brunch. But in the USA fraud like Bernie Madoff spends rest of their lives in jail. This example has yet to be emulated here.

Pension scheme is indeed a good and laudable move. But it is still a premature concept in the context of Bangladesh where governance is in tatters and ruling regime seldom think about welfare of the depositors. When a regime is pretty sure about its assumption of and exit from power, it bothers little about ordinary depositors’ interest and at the end of the day the country and economy pay the the cost.

Notes And References

1. ”Mashey Sorbonimno Chandra Hotey Parey Panchsho Taka(Lowest Monthly Contribution Could Be Tk 500)”,Daily Prothom Alo,P-12,February 15,2023.
2. ”Universal Pension Bill: Could It Really Take Off?”,Rezaul Hoque,https://hoquestake.blogspot.com. For more see at https://hoquestake.blogspot.com/2023/01/universal-pension-bill-could-it-really.html?m=1