Govt banks' new recruits to enroll in universal pension scheme

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The authorities have introduced significant changes to the pension system for employees of the capital market, banking, and insurance sector entities, including Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), Insurance Regulatory and Development Authority (IRDA), and Investment Corporation of Bangladesh (ICB).

The finance ministry’s finance division said in a gazette notification on 13 March that officials recruited by the particular organisations after 1 July will enroll in a new pension scheme called Prattay, under the universal pension scheme.

All state-run banks and entities like Padma Oil and Jamuna Oil, where the government holds more than 50 per cent stakes, will adopt the new pension system for newly hired employees.

Current employees will continue under the conventional pension system, while those with at least 10 years of service left will have the choice to either switch to the new scheme or remain under the existing one.

All new employees of self-governing or autonomous institutions, including Dhaka University, must join the Prattay scheme to avail pension benefits under the universal pension scheme.

Currently, there are four schemes – Pragati, Probash, Surakkha, and Samata – under the universal pension scheme, and a total of 26,851 people completed their registrations until 14 March.

In a notification on Wednesday, the finance division clarified that the new pension scheme aims to provide post-retirement financial and social security to employees.

Asked if Bangladesh Bank will fall under the purview of the notification, Golam Mostafa, member of the National Pension Authority, said it is an autonomous institution, established by law. Everything has been clarified in the gazette notification, without naming any institution. The bank's board of directors will discuss the issue.

In this regard, the central bank spokesperson and executive director, Mezbaul Haque, said they will now assess the implications of the notifications on their new employees.

According to the finance division, a handful of institutions, including self-governing, autonomous, state-run, and statutory ones, now provide pension facilities. Employees face financial uncertainty in the post-retirement period as they receive one-time gratuity, with no monthly pensions.

However, the initiative sparked dissatisfaction among certain quarters. The Federation of Bangladesh University Teachers' Association expressed frustration over the discrimination in pension policies and called for the withdrawal of the notification.

A statement signed by the federation president Nizamul Haque Bhuiyan and secretary general Akhtarul Islam noted that different policies under a single salary structure are contradictory to the spirit of the constitution.

They smelled a conspiracy to put university teachers in confrontation with the government and demanded the withdrawal of the notification.

Benefit calculations

According to the finance division, if a monthly contribution of Tk 2,500 is made for 30 years under the Prattay scheme, the contribution will total Tk 900,000, and the authorities will provide another Tk 900,000.

The total amount will stand at Tk 1,800,000. If the client dies at 75, he or she will receive a pension of Tk 11.2 million in total in 15 years of retirement, Tk 62,330 per month from the age of 60. The return is 12.47 times the client’s own deposit.

Under the Prattay scheme, a maximum of 10 percent of the client’s basic salary, or a maximum of Tk 5,000 – whichever is lower – will be deducted from the salaries.

According to the notification, the amount is likely to increase further as pension benefits will be available for life. If the rate of profit from investments increases, the amount of monthly pension will rise too. Besides, there will be investment rebates on deposits. The pension is free from income tax. It is 100 percent risk-free and safe as it is state-guaranteed.

Selim Raihan, executive director of South Asian Network on Economic Modeling (SANEM), said the government has to allocate a good amount in the budget for pensions. It will be a great relief for the government as it will spend no money on pensions until the new recruits turn 60.

However, it is positive for those who do not receive pensions now. Since there are questions regarding discrimination, the pension authority may hold a multi-stakeholder meeting, and the government may take into account the suggestions or recommendations arising from the meeting, he added.