Universal Pension – a much talk-about and highly anticipated government venture – launches today, ushering in a new era for the citizens of Bangladesh belonging to all corners of the society.
As part of Awami League’s 2008 election manifesto, the Universal Pension Scheme (UPS) is becoming a reality 15 years later.
Prime Minister Sheikh Hasina is set to inaugurate the initiative virtually from Ganabhaban. Finance Minister AHM Mustafa Kamal, Finance Secretary Fatima Yasmin, and National Pension Authority (NPA) Kabirul Ezdani Khan will join the ceremony, said Finance Division sources.
The NPA has issued letters to eight district administrators, directing them to hold online demonstrations of citizens registering and paying installments for pension schemes.
Gopalganj, Sylhet, Rangpur, Pabna, Bagerhat, Mymensingh, Rangamati, and Barguna will participate in the Universal pension inauguration ceremony virtually. Bangladesh missions in Kuala Lumpur and Jeddah will also participate in the event the same way.
The government on January 31 formulated the Universal Pension Management Act 2023, and then created the National Pension Authority on February 13. Later on August 13, the finance ministry issued a gazette notification on Universal Pension Scheme Rules 2023.
According to the rules, a person – depending on eligibility – can avail one of four types of pension scheme. Progoti scheme is for private sector employees, Probash for expatriates, Surokkha for self-employed persons, and Somota for the underprivileged.
A subscriber – after maturity of a scheme – will be able to avail 2.30 to 12.31 times the deposited money, depending on their installment. Monthly installments will be Tk 500 minimum and Tk 10,000 maximum.
Schemes are available in eight tenures spanning from 10 years to 42 years.
For private sector employees, employers will have to pay half of monthly pension installment, and the employee will pay the other half. Moreover, the government will fund 50 per cent of the Somota scheme – which is exclusive to the underprivileged segment of Bangladesh.
Each subscriber will have a dedicated pension account – which will function as a corpus account. The NPA will announce dividends at the end of every fiscal year after calculating a subscriber’s corpus balance in his/her pension account.
This balance amount will be updated on the basis of dividends and total deposits made to the corpus account. After maturity of a scheme, this figure will determine the amount of monthly pension available to a subscriber or beneficiary.
Pension schemes are available to Bangladeshi citizens with National ID cards, who are aged from 18 years to 50 years. Expatriates who do not have NIDs will be able to apply for the UPS with valid passports.
The government will also launch a pension scheme for the elderly who are above 50 years old. They will be able to secure lifetime pension by paying installment for at least ten years.
It should be noted that anyone seeking to register for the UPS will have to surrender existing subscription to any other social safety net scheme. Subscribers will be able to switch installment amounts and schemes after registration.
A nominee will get the same cash benefits until the documented age of deceased pensioner hits 75 years.
The pension scheme has no cash deposit mechanism, and subscribers will have to pay installments digitally. An app has been created for this particular purpose.
Subscribers will be able to pay monthly installments through mobile financial services, online banking, credit card, debit cards and over the counter at designated scheduled banks. There will be no delay fines for non-payment of one monthly installment.
After that, a subscriber will have to pay a 1 per cent fine for each day. The pension scheme will be suspended after non-payment of three consecutive monthly installments. However, an insolvent person will be able to extend this deadline for a year.
A suspended pension account will not be reactivated unless all dues are paid accordingly.
Bangladeshi citizens living in home and abroad will be able to register for the UPS by filling a form online. After registration, a subscriber will get a unique ID number, monthly installment amount, and payment date on his/her mobile number.
Expatriates will however get this information through email. A subscriber will have to use these credentials to pay installments, and avail other related facilities. Union digital centres will help citizens get registered for the UPS at the rural level.
According to the pension rules, a subscriber will be able to take out a loan amounting up to 50 per cent of his/her balance in the pension account. But the loan must be paid back in 24 installments.
Pension installments can be considered as an investment, and used to avail tax exemption. The money received as monthly pension will be tax-free as well. If a subscriber passes away within ten years of registration, the deposited money will be disbursed to the beneficiary with profits.
Finance ministry sources told The Business Post that when the pension scheme gradually gains more traction, it will create an opportunity to reduce the number of citizens dependent on social safety net schemes.
The UPS will help provide a social safety net for the country’s elderly citizens.
Insiders say the universal pension will act as a source of revenue for Bangladesh, as the government will be able to get premium for the initial ten years. No pensions will be disbursed during this initial period.
Besides, expatriates will pay the premiums in foreign currency. They will however be able to pay installments in the local currency when visiting home. This initiative will boost the country’s foreign exchange reserves.
The government will not have to spend any additional funds to disburse pensions, as the schemes can be covered by the 8 per cent interest on installments. The government plans to investment the pension fund in different profitable ventures.
For the foreseeable future, employees of government and autonomous institutions will not be eligible for the Universal Pension Scheme. People currently under any Social Safety Net programme will not be eligible as well.
However, those under a social safety net programme will be able to register for the UPS after surrendering their existing subscription. The monthly pension payout will depend on a subscriber’s installment amount and tenure calculated in years.
‘Progoti’ for pvt sector employees
Private sector employees will be able to register for the Progoti Scheme with Tk 2,000, Tk3,000 or Tk 5,000 monthly installments. The employers will cover 50 per cent of the installment, and the employee will cover the remaining 50 per cent.
If a company decides not to participate in the UPS, any employee will be able to register individually.
A subscriber paying Tk 5,000 monthly for 42 years will get Tk 1,72,327 monthly. Meanwhile, after 60 years of age, a person will get Tk 3,060 monthly pension after paying the minimum Tk 2,000 installment for at least ten years.
‘Probash’ for expatriates
Expatriates will be able to avail Probash Scheme for a monthly installment of Tk 5,000, Tk 7,500, or Tk 10,000. A subscriber will be able to pay the installment in Taka and change the scheme if he/she returns home before sixty years of age.
Monthly pension will be paid out in Taka after maturity.
An expatriate will get Tk 3,44,655 monthly after reaching the age of 60 years, if he/she pays Tk 10,000 per month for 42 years. A subscriber will get Tk 7,651 per month after paying Tk 5,000 for at least ten years.
‘Surokkha’ for informal sector workers
Bangladeshi citizens working in the informal sector or self-employed individuals will be able to register for the Surokkha Scheme. For example, farmers, rickshaw pullers, labourers, blacksmiths, potters, fishermen, and weavers are eligible for this scheme.
A subscriber will have to pay Tk 1,000, Tk 2,000, Tk 3,000 or Tk 5,000 as monthly installment.
Under this scheme, a person – after reaching the age of 60 years – will get Tk 34,465 per month as pension after paying the minimum Tk 1,000 installment for 42 years. A subscriber paying the minimum Tk 1,000 per month for at least ten years will receive a monthly pension of Tk 1,530.
‘Somota’ for the underprivileged
The monthly installment under the Somota Scheme is Tk 1,000. A subscriber will have to pay Tk 500 per month, and the remaining Tk 500 will be paid by the government. For this particular scheme, subscribers will be selected on the basis of household income and expenditure survey.
A person will get Tk 34,465 pension per month after reaching 60 years of age, after paying Tk 500 monthly for 42 years. This figure will be Tk 1,530 for the ten-year tenure.
