The Financial Express

Private sector pension: A distant dream?

Evaly and Fianancial Express Evaly and Fianancial Express
Private sector pension: A distant dream?

It is nothing surprising that more than 40 per cent of the country's 80 million old-age people do not receive any kind of pension benefit.

In fact, relevant statistics, presented at a seminar organised by the Centre for Policy Dialogue (CPD) in Dhaka last Wednesday, seemingly, do not represent the actual situation on the ground.

The number of pension benefit receivers will be far less. Moreover, the financial benefits that the elderly people get is not pension, in all practical terms, but a sort of old-age support made available by the government to distressed section of the population. The benefit is distributed in rural areas under the state safety net programmes.

The truth is that the private sector employers do not offer any sort of pension facility similar to that of the government. The state spends taxpayers' money worth billions every year on its pension benefits. Even the retired public servants do enjoy a hike in their pension benefits when government announces new pay-scales for in-service employees.

On account of post-retirement benefits, the private sector employees do have reasons to grumble. Most of them leave empty-handed at the time of their retirement. Only a few employers do have the provision of gratuity for their employees. According to a CPD-Oxfam estimate, only 10 per cent of the private sector employees get gratuity benefits.

Undeniably, there should be pension provision for all employees in both private and public sectors. But, given the overall employment situation prevailing in the country, the idea of ensuring pension facility in private sector appears to be absurd one, at least, for now.

A sizeable number of employers in the private sector do not even issue any appointment letter and they, usually, hire and fire people orally. It is happening because the market predominantly belongs to the sellers. The labour law, in most cases, does not mean anything either to employers or employees. 

So, what the policymakers are required to do is to ensure the issuance of appointment letters by the employers fulfilling the relevant provisions of the labour law. They should also see to it that the private sector employers, at least, who can afford it, pay gratuities to their employees. Gratuity is one-time payment unlike pension.

However, the government might think of introducing contributory pension system where, as in the case of provident fund, both employees and employers would contribute certain amount every month. In that event the system of gratuity payment  can be done away with.

If its resources permit, the government might also consider payment of certain amount against each private sector employees from its own coffer. That will be more of a welfare approach on the part of the government. But as observed in most cases, there could be wrongdoings with this type of government contributions.

However, all the discussions involving private sector pension payments might appear as a useless exercise, particularly when the government is found least serious about enforcing all the benefits that the private sector employers are legally bound to pay to their employees.

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