Universal Pension to offer 8% interest, lucrative incentives for expats to boost remittance

Citizens who will join the Universal Pension Scheme will receive an 8% annual interest on their contributions, while non-resident Bangladeshis will get an additional 2.5% incentive if they contribute in foreign currencies, according to the rules finalised by the finance ministry.

The incentive for NRB participants, as in place for remittance through formal channels, is expected to encourage more expatriate Bangladeshis to join the pension scheme to secure their future, which will ultimately boost the foreign exchange inflow during this tough time, ministry officials and migration experts hope.

The Universal Pension Scheme will initially encompass four categories of people who are outside the government pay and not covered by pension. They are expatriates, private sector employees, informal sector workers, and poor citizens.

The scheme is expected to be launched in July.

For private sector employees and informal sector citizens, the rate of contribution has been set at a minimum of Tk1,000 and a maximum of Tk5,000 per person per month.

The monthly subscription rate for individuals classified as poor has been fixed at Tk1,000. Of this amount, the subscriber will contribute Tk500, while the remaining Tk500 will be subsidised by the government.

Expatriate Bangladeshis, on the other hand, are required to contribute at a minimum rate of Tk5,000 per month. Additionally, two schemes of Tk7,500 and Tk10,000 have been established for expatriates, who must make their contributions in foreign currency.

Expatriates will receive 2.5% incentive for their subscriptions to the Universal Pension Scheme. Consequently, if an expatriate joins the Tk5,000 subscription scheme, their contribution will amount to Tk4,875.

Finance Minister AHM Mustafa Kamal said in February that an individual contributing Tk1,000 per month from the age of 18 to 60 would receive a pension of Tk64,776 per month.

For someone starting contributions at the age of 30 with a monthly contribution of Tk1,000, the resulting pension after reaching 60 years of age would amount to Tk18,908 per month, he added.

In the event of an individual's death before the age of 75, the nominee will be entitled to receive their monthly pension for the remaining period.

If an individual dies before completing the 10-year fee payment quota, the deposit will be returned to the nominee along with profits.

Under the existing law, citizens between the ages of 18 and 50 are eligible to join the universal pension scheme and receive lifelong pension benefits starting at the age of 60.

However, the finance ministry has introduced an opportunity for individuals above the age of 50 to also participate in the programme. Although they will not receive pension benefits at the age of 60 unlike others, they will be eligible for lifelong pensions after contributing for 10 years. For example, if someone joins the universal pension scheme at the age of 60, they will begin receiving pension benefits from the age of 70.

According to the Universal Pension Scheme Rules, citizens have the flexibility to switch between schemes or alter their contribution amounts at any time.

Sources within the finance ministry said the Universal Pension Scheme Rules and Universal Pension Registration Rules were finalised during a meeting held on Wednesday, presided over by Finance Secretary Fatima Yasmin. These rules will be forwarded to the law ministry next week for vetting.

Pension scheme to roll out in July

The finance ministry has sought an appointment with Prime Minister Sheikh Hasina to inaugurate the Universal Pension System this July.

Several Bangladeshi expatriates living in Saudi Arabia or Malaysia will be connected to the inauguration ceremony through videoconferencing, while some citizens in four categories will be invited to the inauguration ceremony, ministry officials said.

Officials of the Finance Division have stated that the establishment of an authority is required by law before the introduction of the universal pension scheme. This authority will be responsible for formulating the necessary regulations. However, due to the government's eagerness to launch the universal pension system next month, the finalisation of the rules is underway even before the authority is formed.

To encourage widespread participation, the government is planning a nationwide campaign to promote the scheme through television commercials and mass media advertisements. Prior to the upcoming national elections, the ruling Awami League intends to extensively raise awareness about the "pension for all" concept among the public as it was one of its election manifestos.

How 'poor citizens' will be selected

When asked about the process of identifying poor citizens, an official of the Finance Division explained to The Business Standard that since the government will cover 50% of the contribution for the poor, many solvent families will attempt to qualify for this benefit. Therefore, a single set of rules has been established to include the poor while excluding those already receiving benefits from other government programmes such as Vulnerable Group Development (VGD), Vulnerable Group Feeding (VGF), subsidised food assistance through the Trading Corporation of Bangladesh, widow allowances, and disability allowances.

Govt employees may be included later

An official of the Finance Division, requesting anonymity, informed TBS that the existing pension system will continue for those currently serving in the government, autonomous institutions, and state-owned companies. However, there might be an announcement during the inauguration ceremony stating that individuals joining government services from a certain point onwards will be included in the universal pension scheme instead of receiving pensions from the government as per the current system.

How to register

Officials of the Finance Division mentioned that those who wish to be included in the universal pension scheme must register. An app will be developed to facilitate registration from one's home, and registration can also be done by visiting union digital centres. Expatriates will have the option to register using a dedicated app from abroad.

Upon completion of registration, each individual will receive a unique identification number. The government aims to include 10 crore citizens in the universal pension scheme, which may involve the issuance of an 18-digit unique identification number.

The Universal Pension Authority will open an account with the state-owned Sonali Bank. Every participant will be required to make monthly contributions to their respective account numbers.

Expatriates can contribute from abroad, while residents can contribute directly to the bank account or through mobile financial service (MFS) providers such as bKash and Nagad.

Boost in forex earning eyed

Ministry officials believe that expatriates will be particularly interested in joining the pension system. And, because their contributions will be in foreign currency, it will help strengthen the country's foreign exchange reserves.

Dr Tasneem Siddiqui, founding chair of the Refugee and Migratory Movements Research Unit (RMMRU), told TBS, "If expatriates get additional incentives, then it is very good. I think expatriates who work under contract jobs in companies have a steady income. So, they may be interested in being in a universal pension scheme."

"But those working on individual contracts will be less interested if they don't have regular incomes," she added.

Option for taking loan

While there will be no provision for withdrawing the entire pension fund in a lump sum, individuals will have the option to avail themselves of a loan equivalent to 50% of the deposited amount, which will need to be repaid with interest.

The pension deposit will be considered an investment and will qualify for a tax rebate. Additionally, the monthly pension received by pensioners will be fully exempt from income tax.

Back in April 2014, the then Finance Minister, Abul Mal Abdul Muhith, announced the plan to launch the universal pension system. But it did not progress much that time.

In their 2018 election manifesto, the Awami League pledged to introduce a universal pension scheme, which is set to be launched with the next election just around the corner.