Pension payment from the public exchequer is set to increase by over 36 per cent with implementation of the new pay-scale for the government employees from next month.
The existing pension allocation in the national budget is causing a fiscal burden to the government, according to many officials. They suggested formation of a contributory fund to derive its optimal output.
The government has allocated Tk 115.84 billion in this regard in the outgoing fiscal year (FY), 2014-15, which is up by Tk 30.02 billion from the actual allocation.
Next year's estimated figure is nearly 1.0 percentage point higher or 6.0 per cent of the non-development expenditure, according to budget documents.
The proposal for raising the government pension rate is between 62 per cent and 67 per cent for different levels.
This new pension proposal is also set to be implemented from the beginning of FY 2015-16 (July 01, 2015) in line with the national pay-scale for the job-holders.
For paying out the hiked pay and perks to them, the government will require some Tk 451.53 billion in the next FY. The amount accounts for a rise by nearly Tk 160 billion from the outgoing year's revised allocation.
However, the officials said the pension estimate will expand further. The number of retirees will go up from the next fiscal with a large number of government employees going to retirement under the newly-set age limit of 59.
The government in 2012 raised the length of services by two years to 59 from the previous 57, following the rise in life expectancy.
Officials at the office of the Comptroller and Auditor General said the rate of retirement was rather low in the last couple of years as a result of the extension.
FY 17 will also see large-scale and rapid retirement, they also said.
Currently, Bangladesh boasts around 1.5 million pensioners. Of them, around 550,000 retired government employees withdraw pension and other allowances on monthly basis.
The rest surrendered their pension at the time of retirement by taking gross benefits. But they are entitled to get medical and festival allowances.
In normal time, the number of pensioners grows each year by more than 30,000 on an average.
Economists said the government's fiscal burden will rise following big allocation for the pension payout in the upcoming FY.
They suggested the policymakers should now think about introducing contributory-fund system to ease growing fiscal burden.
"This is the high time to create a fund for the pensioners, as the government burden is rising each year on this account," said Dr AK Enamul Haque, a professor of Economics at East West University.
Earlier, he proposed a pension fund for the private-sector employees, and the government is working on it.
Dr Haque said there are many potential sectors for investing money of the fund, so there is little problem for investment.
According to the current practice, the government allocates a fund in its annual budget for pension payment.
Sometimes it needs upward adjustments and sometimes downward, as there is no accurate database in this regard.
The fund, allocated in the budget, remains idle for at least a year for lack of investment opportunity.
Dr Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh (PRI), said a contribution-based pension system should be introduced immediately to ease the government's burden.
With pension payment rising and Bangladeshis living longer, there should be a system of pension, from where the employees would be eligible to draw pension after reaching a certain age, even before retirement.
He said the government might contribute 10 per cent to the fund along with the employees. The fund might be deposited with a board of trustees.
Currently, the government collects fund by a method called 'pay as you go', where it does not contribute anything.
As per current legal provisions, a government employee gets pension until his death, and after his death, his wife gets the benefits until her death.
Dr Mansur pointed out that the government cannot estimate the amount of resources necessary for future pension payment, as many can go on retirement on completion of 20 years of service. There are, therefore, no cut-off dates.
jasimharoon@yahoo.com
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