Kabirul Ezdani Khan is Chairman, National Pension Authority (additional duty). The Universal Pension Scheme (UPS) was launched on 17 August with four categories. In an interview with Prothom Alo on 30 August at the secretariat Kabirul Ezdani Khan talked about the benefits of paying premium under the pension scheme, whether there are any disadvantages and other related matters.
Why did the Universal Pension Scheme (UPS) take so much time to come to light despite being a part of the Awami League’s election manifesto of 2008?
This is actually a matter related to development. We knew it would be difficult to execute the scheme unless capacity is developed. Now we have achieved that capacity. As a result, we have started the work keeping in mind 100 million people. We had to pass through many levels to reach this position. Initially, we had to look after the social security sector. The social security strategy paper was formulated back in 2015. As many as 18.3 million people are now covered under social security. In 2015, when Abul Mal Abdul Muhith was the finance minister, initiatives were taken to create a universal pension scheme. As the continuation of that initiative, papers were drawn, laws, rules and National Pension Authority were formed. Finally, the UPS was launched on 17 August.
Would it not have been possible to form it earlier?
We did not sit idle. We analysed the pension schemes of other countries and that is why we took time. It would be difficult to implement had we formed it earlier. If the implementation capacity of the government does not reach a certain level, the initiative of such a large scale would be really impossible. India initiated a pension scheme back in 2004 for the people who were entitled for pension. Then India had to undergo the process of reformation. After a huge level of calculation, we launched our pension scheme by discarding the people aged over 70 and under 18. We had to keep in mind that not only the inception, rather the implementation process must be fruitful. In South Asia, Bangladesh is the first country to launch the Universal Pension Scheme.
Don't you think the number 10 million including the people under social security is a highly ambitious figure?
How is it ambitious? This is a voluntary matter. We chose 100 million people in a country of 170-180 million. We hope more people of the country will come under its aegis. The economic level we want to reach by 2041, the number may surpass 100 million. This will be run under a state-owned enterprise. As in the developed world the whole pension system is controlled under the supervision of the state, we will also have the same. When you start a thing, it is better to have high ambition. We set our goal on the basis of statistics. More than 10 million of our people live abroad. It is possible to bring the whole population under the scheme. If a brother joins the scheme, later his sister will also join – and through this process it will grow.
Why did you choose 18 as the minimum age? No one earns at that age.
Very good question. Let me give an example. As you have raised a question about income! Say, your brother stays abroad. He asks you to join the pension scheme so that he will send money every month. In the same manner as a father can give the premium of his 18-year-old son. That provision is there. When the boy will start earning his own income, he will provide the premium. One does not need to compare the scheme with savings certificates or bank DPS, rather people will grow the habit of savings through it.
There is a criticism, you have the name universal but in reality, it is participatory. The name should have been, “Participatory Pension Scheme”
We verified other pension schemes of the world. Some say defined it as benefits, some as contributory. There exist many names. We considered which would be good for us. We started amid the reality of the country. If we think about the Scandinavian countries, the government deducts 65% of income as tax from citizens. We cannot do that. We wanted to comprehend which rule would be accepted by our society, families. Our family members depend on one another. One earns while another depends on him. As a result, a father provides the premium of son, brother gives it for brother- that is the reality in our country.
Jiban Bima Corporation has a pension scheme, which is not bad. Wouldn’t the government goal be implemented by adding a few more schemes?
I have received this question before. Jiban Bima Corporation has a business objective. It has operating expenses. From the subscription they receive, they provide the profit after deducting the operating expenses. And even though these are pension schemes, the entire amount can be withdrawn from the corporation when the pension is due. Our scheme does not have that opportunity. Here the operating expenses will not be deducted from the subscription. The profit from the investment will be given to the subscriber.
Can you at least make a provision of the opportunity of withdrawing 50 or even 25 percent at the age of 60?
Pensions are practiced worldwide. Modern pension systems do not have the provision for such one-time withdrawals. Pension means future security. If you take away one-time money, that is not a pension anymore. If one takes cash, he cannot do business, it is difficult for him to invest anywhere. As a result, on the one hand he will lose the money, on the other hand his monthly pension will decrease. This will create a precarious situation.
Currently the government employee can withdraw a portion (50%), isn’t it creating a precarious situation for them?
In pension one is defined benefit system, another is defined contributory system. The one with government employees is defined as a benefit. You cannot match it with the Universal Pension Scheme.
While calculating profit, will you consider the current rate of inflation or consider the fact that the latter may increase in future?
While preparing our budget we have been considering six per cent inflation as a benchmark in the last few years. It is seen, we could not hold that at the end of the fiscal year. There are many reasons not to do so. For example, we are an import dependent country. As a result, a price hike occurs in the local commodity market when the price hike occurs in the international market. For example, the Russia-Ukraine war is making an impact on inflation. Government is taking many measures to handle the situation. I don’t think the current rate of inflation will persist for a long time. While calculating the profit of pension we are adopting the current inflation rate as the benchmark. You will notice that if an expatriate deposits Tk 10,000 per month for 42 years, then after the age of 60 he will get Tk 344,655 per month. We say we will become a developed country in 2041 and inflation will increase day by day. It won't happen. Inflation in developed countries is low. We have calculated that the subscribers will get that amount every month after adjusting for inflation. The amount of money is rather big.
You are saying the amount of money is big, but when the monthly premium of Pragati Scheme is Tk 5000 for 10 years, then one gets TK 7,651 per month as pension. Considering inflation that money rather seems less. What would you say?
This is formula based. I did not invent it not did anyone else.. When you consider profit you also have to consider discount. When the premium period is long then the amount of monthly pension increases.
Do these pension schemes have any impact on reducing the inequality of the society?
Indeed, there is an impact. Let me give you an example. Why did we go for UPS? The government has a basic goal here. I said earlier, the government is providing 18.3 million for the safety net under social security, protection or aid, whatever you may call it. If we analyse the characteristics of a developed country, acquisition of internal resources is a big issue. We also have to focus on it. We have to increase income tax, value added tax, tariff etc. The tariff may not exist in the future but the other two must be increased. Then the capacity of the government will also increase. If you go abroad, you will see that one support comes from the government, another from your own savings. Some also provide two to three types of assistance. For example, even if some people have two to three children, they also get support. Allowances also vary from state to state in the United States. It is being said, this amount of pension is not enough. From where will the government provide more support, if the revenue does not increase?
The government is providing Tk 500 against every Tk 500 premium in the Samata Scheme, is there any plan of increasing this money?
We have just started. We will see in the future.
You have contracted only with Sonali Bank. There is no Sonali Bank everywhere in the country. Any other state-owned bank may come forward for expanding this pension scheme.
We had meetings with Agrani, Janata and Rupali Bank. Let us see whether we may use them similarly like Sonali Bank. But there is a way. Say, you have an account in Prime Bank. Ask Prime Bank to give the premium of your pension to Sonali Bank from your account. They will give it easily. You do not need an account in Sonali Bank for this.
Already a question is raised, one stops giving premium after continuing it for eight years since the age of 20. Would she have to wait till become 60 to get back the deposited taka?
Why are you calling it taka? Call it pension. You have to keep in mind that you have subscribed for a pension scheme. Let me give you an example. If I join the government service at the age of 25 and after 10 years, I say I am going to resign, now give me my pension. Will I get that? Only after giving a subscription for at least 10 years, I get entitled for pension. One may not provide a subscription for some time during these years, and there is provision of giving it with fine. It will be applicable for 12 months; it will not be closed. We are never in favour of closing this opportunity.
If someone starts giving premium at the age of 18 and stops at 35, what will be the regulation for him?
He will get a pension after reaching 60. There is no regulation in between
The housewives, who do not have income, can they come under the scheme?
Of course, they can. There are opportunities even if five people of the same family want to come under the scheme. Whoever earns, the pension will be awarded to the person on whose name the premium is being deposited. There is even no problem if one of the five members of a family makes another member the nominee.
Do the expatriates get extra facilities for paying premium in foreign exchange?
They will get an extra 2.5% cash incentive. When they send money that is spent in buying assets and consumption. Now, it will create a tendency of saving. If one returns home permanently, he can come under Pragati or Surokkha scheme by informing the pension authority.
Some say the government has started this scheme as there is a liquidity crisis in the country.
Aren’t people keeping money at the savings certificates? Does one ever think that the government will snatch this money? The government's crisis has nothing to do with the launch of the pension scheme. I say everywhere, it's your scheme. A scheme to strengthen your security at the age of 60.
There is a complication about the nominee? Who will get the money if the subscriber dies? Nominee or the heir?
Of course, nominee. In most of the cases it is the wife. The same is for the pension scheme, one may nominate the under-age child as nominee. If the nominee dies then comes the question of heir. We have made such provisions that very seldom one has to go up to the court.
How has the response been?
There are two types of responses. One is hit or expressing interest. Another is premium. Despite negative campaigns more than 100,000 people showed interest while more than 10 thousand gave premium. Those who showed interest are considered potential subscribers. In that measure we are getting responses beyond our expected level. The response is higher among the private sector service holders.
Every government takes a popular initiative towards the end of its term. Is it something like that ahead of the next parliamentary election?
The concept emerged in 2008. That's why whenever I talk about it, I explain the background. Research has been done on this, concept papers have been prepared, visits have been made abroad. So, there is no opportunity to mix the election with this. A good thing, whenever it occurs, is good.
Thank you too.