The Universal Pension Scheme (UPS) introduced by the ousted Awami League (AL) government has significantly slowed down just two months into the tenure of the new interim government.
The previous Awami League government allegedly enforced mandatory inclusion in the pension scheme unofficially, requiring future employees of over 400 self-governing, autonomous, state-owned, and statutory organisations to enrol, resulting in a rise in registrations.
However, the current interim government has moved away from this policy, casting doubt on the programme's future in the wake of the power transition.
Officials within the National Pension Authority, speaking anonymously, said that nearly 20 per cent of contributors have stopped making payments, and the number of new registrants has dropped significantly.
‘UPS was uncertain from the start under AL’
Dr Zahid Hussain, lead economist in the South Asia Finance and Poverty group of the World Bank, told The Business Post that the future of the pension scheme was uncertain from the moment it was introduced by the Awami League government. With the shift in power, the pressure to include employees in the scheme has eased, leading people to turn away from the programme.
"Given the level of corruption by the ousted AL government, people could not place their trust in it," Zahid Hussain said. "Although many were forced to enrol in the pension scheme, questions lingered — Is the money safe? When it comes time to pay, will the government be able to disburse the funds? These concerns were prevalent among the public,” he added.
UPS investments yield profits
According to sources within the Finance Division, a total of 3,72,168 individuals have so far completed registration and made contributions to four schemes under the UPS – Prottoy, Pragati, Surokkha and Somota.
The total amount of contributions stands at Tk 125,66,96,500. Of this, Tk 124,99,55,669, including government subsidies, has been invested in various government treasury bonds. These investments have already started generating returns.
The pension authority made its first investment in October 2023, putting Tk 11.31 crore into a 10-year bond. The second investment, amounting to Tk 10 crore, followed in December with a 15-year bond.
Further investments were made in January 2024, with Tk 10 crore in a 10-year bond, and in April, another Tk 11.60 crore in a 10-year bond. In May, Tk 21.50 crore was invested in another 10-year bond, followed by Tk 30.60 crore in a 15-year bond in June. Most recently, Tk 25.25 crore was invested in a 5-year bond in August, and Tk 8 crore in a 10-year bond in September.
Notably, the profits earned from investments made through the pension scheme up to June 30 this year will be credited to customers' accounts in October. Subscribers will be able to view the total amount of their contributions and profits from the comfort of their homes.
Registrations plummet
Initially, the UPS saw widespread enthusiasm, although registration slowed down at one point. However, from April this year, the number of people enrolling and making contributions surged rapidly. In April alone, 60,000 individuals registered, pushing the total number of enrollees past the 1,00,000 milestone for the first time eight months after the scheme’s launch.
In May and June, the scheme continued to attract significant numbers of new contributors, bringing the total to around 3,50,000 by the beginning of July. The contributions also soared, with deposits reaching nearly Tk 100 crore by this time.
However, following the fall of Sheikh Hasina's government, the pace of registrations significantly slowed. Facing protests from students and the public, Sheikh Hasina resigned from her position as prime minister on August 5 and left the country.
The student-led movement against her government began in mid-July, and since the onset of the protests, the momentum of pension scheme registrations has noticeably declined.
According to relevant sources, as of July 2 midday, 3,40,242 individuals had completed registration by paying contributions to the UPS.
Two months later, by the afternoon of September 9, the number of registered contributors had risen to 3,72,094.
However, in the following month and five days, only 284 new individuals registered for the scheme. As of the afternoon of October 14, the total number of registrants in the UPS stands at 3,72,378.
Contributions declined too
About five months ago, Mohammad Sohel Khan, a private high school teacher, felt pressured by the Upazila Nirbahi Officer (UNO) to register his wife under the “Somota” scheme of the UPS programme, contributing Tk 500 per month. Despite opening the account, he has not been keen to make regular contributions.
Sohel Khan expressed his frustration, stating that if the government were to enforce mandatory deposits as it did with account registration, he might resume payments, but it would not be voluntary. He cited the difficult financial situation of teachers like him, who are struggling to make ends meet with their current salary structure.
"We are already burdened with debt just trying to maintain our standard of living. We have to survive first before thinking of pension contributions," he said.
Controversy also arose
While registration numbers and contributions dwindled, the introduction of the Prottoy scheme sparked further discontent.
The National Pension Authority sources said that all employees of government-controlled organisations will receive monthly pensions upon retirement.
To facilitate this change, the authority introduced a new scheme named “Prottoy,” which has been added to the UPS that was launched seven months ago.
Under the “Prottoy” scheme, unlike the previous provident fund system where employers' contributions were often less than employees', organisations will now be required to match their employees' contributions. This is expected to result in greater benefits for pensioners.
However, unlike the existing system, the “Prottoy” scheme does not offer a lump-sum payment upon retirement. This has sparked opposition from teachers at autonomous institutions such as universities, who argue that the scheme creates inequality compared to government officials.
UPS reforms to regain trust
In light of the overall situation, a meeting was held on October 14 at the Ministry of Finance, chaired by Finance Adviser Dr Salehuddin Ahmed. The meeting of the National Pension Authority's board of directors advised the authority to work on regaining public trust.
Additionally, it was suggested that necessary reforms be implemented to increase the number of subscribers.
Md Golam Mostofa, a member of the National Pension Authority, stated that enrolments in the UPS were regular before, but following the change in government, the authority was unable to engage in promotional activities, leading to a decline in new registrations.
“The board has advised the National Pension Authority to take steps to attract more customers and implement necessary changes if required,” he said.
Insurance, reforms may boost UPS
Regarding potential changes, Md Golam Mostofa explained, "Currently, our scheme is not connected to any insurance, but in many countries, pensions are linked with insurance policies. If we find that adding insurance will benefit pensioners and increase enrolment, we can introduce such changes."
He gave the example of a worker who may stop making contributions after an accident. “If insurance were integrated, the worker could receive benefits through that. Many countries have raised the pensionable age, similar reforms could be considered,” he added.
Golam Mostofa further noted that the National Pension Authority plans to resume its promotional efforts encouraged by assurances from the interim government.
"The board has instructed us to do whatever is necessary to increase enrolment. We are preparing for that and will soon reach out again to local administrations. The advertisements have already resumed," he added.
