Universal pension : another step towards a welfare state?

The present government can take the credit for undertaking both mega projects that backstop development activities in the short to medium term and welfare projects at micro level that benefit hundreds of thousands people at the margin in near term. Granted, the former eclipse the latter by billions of taka in terms of expenditures. Also conceded is the fact that the coverage of the various social safety net programmes is minuscule compared to the size of the targeted population. But for a country grappling with myriad economic problems and struggling to set priorities in allocation of scarce resources, the very commitment to alleviating the hardships of the poor and the disadvantaged should appear as nothing but an article of faith. When many developed rich countries are backpedaling in continuing with their social security programmes, Bangladesh government's determination to both expand the coverage of beneficiaries and the number of safety net programmes is nothing short of bravado. But it is one embedded in a political ideology of people-oriented governance. The decision to add universal pension to the present social safety network is the latest manifestation of the government's determination to take another step towards a welfare state. In a free enterprise capitalist system this is the only antidote to growing inequality and marginalisation of people.
On February23, 2022 the Cabinet Committee on finance took the decision to introduce universal pension scheme within six months to one year, covering people in the age group between 18 to 50 years. In this connection the finance minister mentioned article 15 of the constitution according to which people suffering from hardships in old age are entitled to financial assistance like pension. In introducing universal pension the government is going to meet the constitutional obligation, he said.
According to the proposed pension scheme those who are in the present labour force will be eligible for inclusion in the scheme, excepting those employed by the government. The scheme being optional, theoretically there will be 700 million participants to begin with from the current fiscal. But the details about the ratio of contribution by the participants and the government have not been made public. It has only been learnt that the minimum and maximum cntribution by a participant will be taka 500 and taka 5000. The amount of monthly pension will depend on the age at which the payment of contribution starts. This appears logical but not fair because the monthly pension should be commensurate with the cost of living. The length of the period of contribution and the amount contributed alone should not determine the amount of monthly pension. Otherwise, the scheme will not achieve the aim intended i.e., helping in old age to cope with hardships of living. This will require payment of higher contribution by the government in respect of low income groups compared to those who are in higher income brackets. Though conceptually contributory, actually pension in a country like Bangladesh will in practice have a good portion of subsidy. Therefore, the government's financial involvement will be on two counts. Firstly, normal contribution made to the fund for pension on pro rata basis and secondly, payment of contribution, including subsidy, for low income participants who contribute less than the high income groups. Another decision that the government has to take is regarding the fate of the present social safety net programmes. If the pension scheme starts from this fiscal, from September as scheduled, the government cannot terminate the existing safety net prigrammes immediately as the beneficiaries will not be covered by the pension scheme. Given the age of the beneficiaries, the safety net programmes will have to continue for at least next 20 years. In the light of the government' s fiscal capacity, it will be prudent to start implementing the pension scheme covering the low and middle incime groups at the first phase, and gradually expand to cover the other groups. This will, of course, have the disadvantage of having lesser amount in the pension fund contributed by participants in the first phase and consequently higher contribution by the government.
According to a news item in a Bengali daily, five memorandums of understanding have been drafted for agreement with four government and one private organisations, while relevant rules and regulations are being finalised for implementation of the pension scheme from next September. The news item also mentions about queries being made by the visiting IMF Mission in the capital sbout the financing of the pension scheme. It should be ensured that the Mission does not add any new conditionality or interpret existing 38 conditions for the $ 4.7 billion dollar loan in a way that may scuttle or impede the pension scheme. The universal pension scheme is a constitutional obligation of an elected government. It has been kept in the backburner for many years and cannot be kept in abeyance in the name of belt tightening now. In fact, the current high cost of living is a signal that old people cannot be left at the mercy of market and fate any longer.

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