Govt launches ‘Prottoy’ pension scheme today

The government will launch a new pension scheme called 'Prottoy' today (Monday) for employees of self-governing, autonomous, state-owned, statutory or similar organisations and their subordinate bodies.
New employees joining these organisations from 1 July will be mandatory members of the Prottoy scheme under the Universal Pension Scheme.
This scheme differs from the traditional pension benefits received by existing government employees upon retirement.
University teachers have been protesting the new pension scheme for the past few months and have declared to go on work absentation from Monday if they are not excluded from the Prottoy scheme.
Golam Mostofa, a member of the National Pension Authority, told The Financial Express on Sunday that the new scheme would be launched as planned.
"The pension authority has not received any instructions so far from the government to delay the launch," he said, responding to a question about the university teachers' protests.
The Federation of Bangladesh University Teachers' Associations (FBUTA) on Sunday announced a nationwide work stoppage as the government did not exclude them from the scheme.
Professor Nizamul Hoque Bhuiyan, general secretary of the federation, made the announcement at a press conference in front of Dhaka University's Arts Building on Sunday.
The federation claimed the Prottoy scheme is "discriminatory" and will "result" in financial losses for university teachers appointed from July onwards.
The Ministry of Finance issued a press release on 20 March introducing the pension scheme.
It said that existing officers or employees of these institutions would not be affected by the introduction of the Prottoy scheme and their existing pension/gratuity benefits would remain unchanged.
Those with a minimum of 10 years of service remaining can choose to participate in the Prottoy scheme if they wish.
Participation in the Prottoy scheme will provide a monthly pension upon retirement and ensure future financial security for employees joining these institutions from 1 July 2024 onwards, the press release mentioned. Currently, very few self-governing, autonomous, state-owned, statutory or similar organisations and their subsidiaries offer pension schemes.
Most employees in such organisations are covered by a welfare scheme and the Contributory Provident Fund (CPF) system.
Under the CPF system, employees receive a one-time gratuity as a retirement benefit, but not a monthly pension, which can lead to financial insecurity after retirement.
The government introduced the Prottoy scheme as an alternative to the existing system to provide financial and social security to employees in their post-retirement life, according to the press release.
The scheme involves deducting 10 per cent of the basic salary of an employee, up to a maximum of Tk 5,000, whichever is lower. The organisation will contribute the same amount.
Both contributions will be deposited by the organisation into corpus accounts for the employees, managed by the National Pension Authority.
A pension fund will then be created for each employee, with the National Pension Authority investing the funds in profitable sectors.
The amount of pension paid to employees will be based on the accumulated profits and employee contributions.
Under the existing CPF system, employees contribute 10 per cent of their basic salary, while organisations contribute 8.33 per cent. Under the Prottoy scheme, organisations will contribute 10 per cent, which is 1.67 per cent more than the CPF scheme.
For example, in Prottoy scheme, an employee contributing Tk 2,500 monthly for 30 years would receive a pension of around Tk 62,330 per month upon retirement at 60.
In this scenario, the employee's total contributions over 30 years would be Tk 900,000, matched by the organisation for a total of Tk 1.8 million. If the employee lives to 75 and receives the pension for 15 years, the total payout would be Tk 11,219,400 -- 12.47 times their own contributions, said the press release.
This figure could increase further if the pensioner lives longer. Besides, a higher rate of return on investment would lead to a higher monthly pension.
The government will cover all National Pension Authority expenses. The monthly pension will be calculated based on the subscriber's accumulated corpus, investment income and an annuity calculation.
Investment rebates will be available on accumulated contributions and the pension itself will be tax-free. As a state-guaranteed scheme, Prottoy is described as completely risk-free.
Employees enrolled in the scheme will automatically receive their monthly pension in their bank accounts from the following month after reaching retirement age. They will be notified by SMS and will not need to visit any offices or submit additional paperwork.
The press release said the Prottoy scheme will be attractive to new employees and effective in securing their financial future.
There are four other pension schemes under the Universal Pension Scheme: Probash, Progoti, Surakkha and Samata.
Until Thursday last, some 323,773 people subscribed to different pension schemes, depositing Tk 970 million. Of this amount, Tk 930 million has been invested in treasury bonds.
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