Worrying rise in government's pension payment liabilities

The government's pension payments are growing at a worrying rate -- nearly 22 per cent annually -- over the past three years for higher life expectancy and the latest rise in basic pay.

Such payments are expected to increase further this fiscal as the government allowed some pensioners, who had withdrawn their cent per cent pensions, to receive pension again.

However, this rise in pensions excludes gratuities and other annuities.

"…some 13,000 retirees who earlier surrendered their 100 per cent pensions are now on the list of pensioners this fiscal," said an official at the government's pension office.

They have been enjoying the financial facilities from this fiscal year but the total payments so far given to them are yet to be compiled.

The number of the newly included pensioners excludes those in the armed forces, postal department and railway service, the office said.

The government allocated Tk 1.5 billion for them in the national budget.

However, people familiar with the issue at finance ministry told the FE last week that pension payments are expanding fast for higher life expectancy and the reforms conducted recently.

Life expectancy here now stands at 73.

It was just over 45 years in 1960, 47 in 1970, 53 in 1980, 58 in 1990, 65 in 2000 and 70 in 2010, according to World Bank database.

The official, however, said this pension payment was over 30 per cent of the government expenditures on pay and allowances in the fiscal year 2018.

"We're now opting for recruiting lower-grade jobs like driver and peon through outsourcing as pension liabilities are growing."

Without reforms, experts and economists argued, pension payments are likely to keep increasing, thus reducing fiscal space and undermining fiscal sustainability.

"Time is ripe to start working on a contributory and fully funded pension system, given rapidly declining fertility and mortality rates which will increase the number of retired public servants significantly in the next two to three decades," said Dr Zahid Hussain.

"There're several low-hanging fruits that can be harvested immediately as a full transition to a fully funded and contributory public pension system will take time, he told the FE.

"These include increasing retirement age for both civil and military personnel by three to five years and changing the current practice of calculating lifetime pension benefits to eliminate perverse incentives."

Without deep and comprehensive reforms, fiscal space in the budget will erode rapidly in the years to come, thus limiting the government's ability to undertake discretionary spending to respond to the changing demographic and development needs, he observed.

The country has 692,515 pensioners as of June 30 last year against 673,548 in fiscal year 2016-17.

The pension payment was Tk 147.2 billion (including gratuities) in fiscal year 2017-18.

It was just Tk 104.6 billion two years back in fiscal year in 2015-16.

Some 27 per cent of the total pension amount goes to family pensions.

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