Let UPS be not a failure

In a welfare state, the provision of a universal pension plays a key role in ensuring social security for the elderly. Developed countries generally offer pensions based on individuals' contributions to pension schemes. According to the International Labour Organization (ILO), 21 countries provide universal pension benefits to all older people above a certain age. In contrast, developing countries have discretionary pension systems, often limited to government employees, which reduces the coverage.

The elderly people in this country do not get a fraction of the institutional facilities and benefits that their counterparts in developed countries are entitled to. Worse still, their wellbeing is becoming a casualty of the modernity itself. The break-up or slow disintegration of the traditional family structure has left the aged ones high and dry - physically deprived and psychologically estranged. Their pain and solitude hardly find any exposure in the public domain.  With the steady increase in the average life expectancy, the issue of elderly well-being will become even more pressing in the future.

Against this backdrop, introduction of the Universal Pension Scheme (UPS) in August 2023 by the ousted Awami League government was widely hailed as a step towards building a welfare state. However, the scheme has been dogged by controversy from its inception. Firstly, public trust in the government has been severely eroded by a series of corruption scandals involving banks and other financial institutions. This widespread distrust fuelled concerns that the UPS might be a government ploy to siphon funds from the public after depleting the banks' reserves. Then there has been deep skepticism among the masses about the scheme's long-term viability in view of political transition or policy shift. Beyond these concerns, the actual financial benefits offered by the scheme have also been a subject of considerable debate.

Many are also skeptical about whether the government will be able to return the money to them on time. Furthermore, persistent high inflation and job insecurity among private employees have been deterring many of them from joining the scheme.

As a result, public response to the pension scheme has been lukewarm from the beginning. In the first year, from August 2023 to August 2024, a total of 372,401 people signed up for the scheme, contributing a sum of Tk 1.31 billion. However, following the fall of the Sheikh Hasina government, despite assurances from the interim government to continue the scheme, only 807 new members joined in the past six months. Reportedly, many of those who initially joined the scheme have stopped making monthly contributions due to their concern about the scheme's future.

A recent survey conducted by the Bangladesh Institute of Labour Studies (BILS) on ready-made garment workers highlights the prevailing skepticism and uncertainty surrounding the UPS. It found that about 99 per cent of the surveyed workers are not interested in the UPS due to financial constraints, fears of job cuts, the risk of premium loss, and concerns over uninterrupted premium payments.

Concerns also linger over the management and security of the pension fund. The government has established the National Pension Authority under the Finance Ministry to oversee the invested capital. The authority is investing the fund in Treasury bills, meaning the money goes to the government and is spent through the budget. This raises a critical question: when the time comes to roll out pensions, will the authority have the capacity to pay?

To dispel doubts regarding the system's structural integrity and long-term viability, experts opine that the Pension Authority should be a fully independent constitutional institution, similar to the Public Service Commission or the Office of the Auditor General. The pension program should also be established as a permanent system. While its rules and regulations may be modified as necessary over time, the core structure must remain intact. These reforms could significantly enhance public confidence in it.

And then the authorities must focus on making the pension schemes more lucrative. Currently, the interest rate of the public pension scheme is 8 per cent, whereas the interest rate of the saving certificate is 12 per cent.  To ensure wider participation in the UPS, the government should enhance its appeal by increasing interest rates and introducing additional benefits such as insurance, one-time gratuity, and other incentives.

One of the main objectives of introducing the UPS was to reduce the disparity between private and public sector employees in terms of pension benefits. Under the Progoti scheme, which is designed for private sector employees, 50 per cent of the premium is to be paid by workers and 50 per cent by employers.  However, due to weak enforcement, private organisations have shown little interest in enrolling their employees. To ensure the programme fulfills its purpose, it should be made mandatory for private organisations to include their employees in the pension scheme and cover half of their monthly premiums.

The BILS survey on RMG workers also presents several recommendations to make the UPS more accessible for private sector employees. It proposes the introduction of measures that could support workers during income shocks. These include allowing the withdrawal of funds or providing loan facilities during financial crises, temporarily suspending contributions during periods of hardship, and ensuring pension continuity even when workers change jobs.

It is projected that the number of retired individuals in Bangladesh may outnumber the working population in approximately 20 years. In such a future scenario, a comprehensive pension system, accessible to all citizens, would serve as a crucial pillar of social security for the elderly.  Therefore, the government must take decisive steps to solidify the foundation of the UPS and enhance its attractiveness and accessibility for all citizens.

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