Pension Scheme Says It All

Less response to national pension scheme Hints governance situation is poor and grim.

It has been more than two years since the govt introduced the Universal Pension Scheme, being the 5th country in the subcontinent. However, the former govt did it as a desperate measure to get funds from the people. I also questioned such measure as in this part of the world govt lacks clarity in spending public money and widespread abuse of public fund management is pretty common here (see " Do We Need Social Security Program? " June 16,2022, and "Universal Pension Bill: Could It Really Take Off?" January 27,2023). Less spontaneous response to pension scheme says how people greeted it. Only 300000+ people subscribed to it, generating a total of Tk 1.57 billion.

The scheme is based on three acts: the Pension Fund Management Act 2023, the Pension Fund Regulations Act 2024 and the Pension Fund Investment Act 2024. The Pension Fund Investment Act says that the fund cannot be invested abroad. It should be invested in treasury bonds, securities with AAA rating, any public project undertaken by the govt ,FDR and mutual funds. Apart from govt securities, investment in other assets should not cross 25% of the fund. For govt securities, there is no limit on investment.

This investment in public projects is a spirit killer. Here cost and benefit analysis of public projects are done to convince the policy makers and public and to hide the true cost of the projects, resulting in more taxes and cut in benefits. Why should one be interested in contributing to projects that will literally generate little or no returns?

Only secured assets for investments are treasury bonds and mutual funds. The scope for growing the Pension Fund is limited. Like provident fund of a private company, bigger and larger pension fund means more people can take loans from the fund to cater to their need for building a home,augmenting income, financing higher education of children, financing treatment etc.

Pension Fund will grow more if it is allowed to invest abroad in the commodity markets in London,Dubai and Singapore. At the same time it should be allowed to finance investment projects of the NRBs. For instance, if migrant Bangladeshi or NRBs get credit to open a restaurant, a barber shop, purchase a taxi or start a grocery , it would augment his income and become a genuine source of returns for the pension fund.

By the same token, at home,if we have two /three govt-backed home-credit institutions who will finance real estate projects undertaken by companies floated through public private partnership, then lower income group would be able to purchase apartments at affordable [price]. And they will become a great source of investment for the pension fund.

Not only that if SMEs and startups are financed through SME bonds and startup bonds then pension fund may get other areas to invest.

Quintessential is who is managing the fund. If we hire investment banker, hedge fund manager from abroad then these foreign nationals will take good care of it. Prior to that we need to fix the macroeconomic environment. For that the Monetary Policy Committee of the central bank should be led by professional foreign macroeconomist who can advice the govt what steps have to be taken and what not.

Given the governance situation in the country, running too many social security programs and pension scheme sounds like luxury. Introducing new technology and spending public money will serve little if governance situation, which depends on practice and habits, does not improve dramatically. The apt example is the launching of voter ID card with photo that later became the national ID card. Bangladesh was the first country in the subcontinent to launch such a project in 2007 to bring transparency in pubic spending. Then British foreign state minister David Miliband even took part in the event with much fanfare. Unfortunately, we saw rigged elections and misappropriation of public money in spite of the presence of such cards. Abuse of social benefits of freedom fighter is another example. Only when the proper NID based database was launched ,many fraud freedom fighters got caught. The same NID is used by private mobile phone operators to sell SIM without any trouble. It is the intention and application that matters.

Bangladesh was the first country in the subcontinent to launch NID with photo and 5th in terms of launching the pension scheme. This kind of new things did little help to ease the burden of ordinary people. Dilapidated condition of the governance turns these things into a mockery instead reducing people's woes.