Pension System In Bangladesh

Abstract
The retirement issue mostly relates to those who are in job situation
and the
retirement age in public service is 57 years. The agriculture sector
has no retirement
concept as also the case in self-employment. The aspects of
retirement in terms of
age, old age welfare and social impact have been discussed in this
paper.
Pension system in Bangladesh is mainly observed in government
services. The
pension issues are settled according to the rules of the Public
Servants (Retirement)
Act of 1974. There are four categories of pensions which have been
elaborated and
analyzed in the paper.
There are about 36 million labors working in agriculture sector in the
country, who are not covered by pensions. Similarly migrant workers
do not receive any pension. There is no provision of pension for
private sector workers. They only receive some gratuity at retirement.
Government has recently introduced Old Age Allowance Programme
which covers small fraction of elderly people in the country who are
not covered by pension system. Although limited in coverage, this is a
healthy beginning of providing security to vast majority of the elderly
people who are not covered by the existing pension system.
Family support is the basic security of most elderly people in
Bangladesh. Policy level initiatives and institutional arrangements to
provide social security to the elderly outside the family system is
quite limited. There is a felt need for evolving a retirement and
pension system that will be fair, equitable to all segments of the

society, meet the constitutional obligation of social security for the

elderly and conform to basic human dignity.

Introduction
Bangladesh, the eighth largest and one of the most densely populated
countries. It has a population of 158,570,535 millions in 2011. In 2007, the
number of the older people aged 60 and above in this country was 9.41
million and it has increased from 1.94 million in 1951 which is quite
phenomenal. The economy of Bangladesh is mostly agro-based. Agriculture
makes highest contribution to Gross Domestic Product (GDP) as can be
deduced from the statistics on contributions of different sectors. Bangladesh
witnessed on an average growth rate of little over 5% of GDP between 19962000 and the projection for the present fiscal year is around 6%. Bangladesh
is now the 8th populated country in the world and projected to remain in the
same position in 2050.
Bangladesh Government has introduced a pension system for its retired
employees since the British rule in 1924.Retirement age in government
services is now 57 years. According to general recruitment rules, a person
can enter into public service from minimum eighteen years age provided
that the person has requisite qualification for service. Public pension is one of
the key areas of public expenditure in Bangladesh. Pension rules were
modified after the end of the British rule in 1952 and later it was modified
again in different stages in 1972, 1974, 1977, 1982, 1985, 1988, 1989, 1991
and 1994 after the independence of Bangladesh in 1971.At present,
generally, a government employee gets 32, 48, 64 and 80 percent of the
basic salary as the pension after retiring or at death at the 10th, 15th, 20th

and 25th year of his/her employment respectively. There are different types
of pension such as Compensation Pension, Invalid Pension, Superannuation
Pension, Retiring Pension, Optional Pension, and Family Pension. Pension
delivery processing for compensation, superannuation and retiring pensions
are almost similar. But this is different for invalid, family and extraordinary
pensions. For example, 10-11 sets of papers have to be submitted to the
authorities for retiring pension. But for invalid pension, 11-12 sets of papers
have to be submitted. In case of family pension, 10-18 sets of papers have to
be submitted.

It has various types of pension:

Compensation pension
This type of pension is provided to workers or officials who have
consequently lost their post as a result of elimination of their posts in
downsizing some offices or organization by the government to maintain an
economic balance.
Invalid pension
If a person becomes invalid permanently, physically or mentally, in that case
the government grants the person invalid pension. There are a number of
stipulations that has to be satisfied and long procedures that has to be done
to earn or achieve this type of pension from the government.
This includes medical and travelling issues where the person has to provide
correct and valid papers and documents for their claims as per the
requirement of the governing. But in case the person becomes invalid due to
unacceptable situations by the organization, that person will not be entitled
to invalid pension.

Superannuation pension
Superannuation pension occurs when a public servant compulsorily has to
retire at certain age which is determined by the government. This extent of
time is perhaps determined by the government and also the profession of the
individual is also taken into consideration. Recently the government of
Bangladesh has increased the retirement of judges and public university
teachers to 65 years; whereas the retirement ages for military personnel
remain at the age of 57.
Retiring pension
According to the governments law, if it is necessary to do so, a public
servant has to retire after completing 25 years of service without assigning
any reason; a structure of pension has to be paid to the individual. This type
of pension is known as retiring pension.

Optional pension
A public servant has the right to retire at any period of time before the
completion of 25 years of service with a 30 days prior notice to the date of
her determined retirement. In this case the government has to accept the
notice with no refusal. Pension achieved from this type of retirement is called
optional pension.
Family pension
In case of the death of a public servant, his/her family is allowed a pension
from the service which the deceased has provided to the government. The
public servant has to previously declare nominee of his/her pension, or the
controlling authority has to the right to decide the successor to the pension.
The rules for providing family pension are perhaps different for different
members nominated by the individual.

Development of Public Pension in Bangladesh

The public pension system of Bangladesh as it is today is the outcome of
developments for about a century. Chronologically, the development of
public pension in Bangladesh can be divided into segments: British period,
Pakistan period and Bangladesh period.

British Period: 1871-1947

Pension Act 1871 is the first pension related act of Bangladesh
that was promulgated by the British Indian government.
The act hasnt dealt with pension for public employees.
Pension under the scope of this act refers to compensational
payments made by government in respect of any right, privilege,
perquisite or office.

Pakistan Period: 1947-1971

In 1947 Pakistan iinherited pension system of British India.

 Gradually it did not appear to be fully appropriate. Some

modifications were introduced through amendments in CSR and
Bangladesh Service Rules (BSR). It has further increased.
Pension coverage by incorporating officiating and temporary
public employees. In 1952, gratuity and family pension were
introduced as two new pension benefits under Revised Pension
Rules 1966.

Bangladesh Period
After independence of Bangladesh in 1971, another set of
changes in pension system was in motion.
The first major change was in 1972 regarding basis of
determining pension. Instead of being based on average pay of
last 36 months, pension was to be determined on last 12 months
pay average.
The percentage rate was lowest 21% for 10 years qualifying
service to highest 60% for qualifying service of 25 years or
above.
Since 1989-90 financial year, the percentage rates have been
increased to lowest 32% for 10 years pensionable service to
highest 80% for pensionable service of 25 years or more.

SWOT Analysis
Strength:

With this system the retired persons or their dependents do not have to
depend on others for their survival.

Pension is allowed to the family of a pensioner on his death and this is

called family pension.

In 1994, the government simplified the rules and regulations relating to
sanctioning of the pensions of the government officials.

The government servants receive their pension from the government and
officials of autonomous bodies receive their pension from their appointing
authority.

Weakness:
If an employee is engaged in two posts and because of abolition of one
post, he wants to retire or the authority intends to retire him, in that case
the matter has to be sent for decision of the government.

The medical certificate is very difficult to be obtained in time in which

case granting of pension is unnecessarily delayed.

If an employee is discharged from service for other reasons, then he will

not be given the pension despite providing medical certificate.

There is no provision for pension for the persons working in agriculture

and industries sectors. The migrant laborers also do not qualify for
pension.

Other Pension Benefits (Opportunity)

As mentioned earlier, pension is a package that constitutes a number of
benefits besides pension. Now let us take a look at the other pension benefits
apart from pension.
Leave Preparatory to Retirement (LPR)
This is considered to a retired public employee.

Under provisions made in the Public Servants (Retirement) Act of

1974, it is mandatory for a public servant to retire from service
on the completion of the fifty-seventh year of his age, unless
retired earlier compulsorily or otherwise by the government.

The Act provides that a public servant retiring from the service is
entitled to LPR normally for an additional year beyond the date
on which he completes the fifty-seventh year of his age.
However, the period of such leave may extend beyond one year
after LPR, i.e beyond the completion of the fifty-eighth year of
age. His retirement takes effect on the expiry of LPR.

Gratuity
The government presently allows gratuity to the retiring person
up to 80% of the emoluments of the retiree after his completing
25 years of pensionable service.

Presently a retired public servant is allowed a gratuity in lieu of

50% of his gross pension that he compulsorily surrenders at the
rate of BDT 200 for every one taka.

He is also allowed to surrender the remaining 50% of his gross

pension at the rate of BDT 100 for every one taka.

Accommodation
In the event of death, retirement including compulsory
retirement, the retired person or his family is entitled to remain
in the allotted accommodation.
If the retired employee (allotte) dies while in service, his family
shall be permitted to stay in the accommodation for two years
subject to certain conditions from the date of the death of the
allottee.

Benevolent Fund
If a public employee dies in the middle service life or dies within five
years from the date of superannuation, he or in the event of death, his
family, shall be entitled to receive a benevolent fund grant from the
benevolent fund for a period of ten years according to the scale
specified in the schedule of the Bangladesh Employees Benevolence
Board Act 2004, the law relating to the benevolent fund.
More Pension Advantages by Government of Bangladesh:
The government has introduced a pension package that constitute of
pension, gratuity, group insurance, benevolent fund and medical allowance
for the retired public employees and their dependents. With this system the
retired persons or their dependents do not have to depend on others for their
survival.

Nomination of Successor
A pensioner can nominate one or more members of his family as
successor of his partial or full pension during service period or later.
Without nomination, the pensioners last controlling authority will
determine the successor according to Memorandum No. 2566(40) dated
16-04-1959, in case of absence of any family member to inherit pension,

even male child above 25 years age will get pension. But he will continue
to receive it till the time left up to 15 years from the date of pension
commencement.
Age Limit of Unmarried/Widow/Divorcee Daughter
If time is left to be 15 years from commencement of pension,
unmarried/divorcee/widow daughter(s) irrespective of age will inherit
family pension.

Handicapped Children
Handicapped children are entitled to family pension for life. But they will
have to submit copy of identification of registration under Clause: 13
(Kha) of Bangladesh Handicapped Act 2001.
Widow
If the widowed wife of public employee does not remarry, she is entitled
to full family pension for the whole life. But they cannot submit pension.
Family Pension in Death after Retirement
If a pensioner dies after retirement, his family/nominated family member
will continue to receive pension in same rate.
Pension in Case of Suicide
Family of pensioner who has committed suicide will receive pension as
usual.

Pension Issues in Bangladesh (Threats)

Corruption regarding pension has been and reports published in the selected
newspapers over the last year. It is seen that cross portrayed in letters
-section of public pensioners are being facing pension related corruption.
Pension related corruption discussed in the newspapers include partial or full
deprivation from pension, unnecessary delay in processing pension delivery,
harassment during collection of monthly pension, not providing necessary
papers duly, undue delay in pension payment and lack of implementation of
pension regulations.
Two former executives of a public jute mill informs that they had to
retire on February 2004 under Golden Handshake program with
pledge of various benefits in single package including full payment of
gratuity and provident fund at one time. But now Bangladesh Jute Mills
Corporation (BJMC) authorities have declared to pay 75% of the
promised benefits .
A former employee of Dhaka Electricity Supply Authority (DESA) who
regularly retired on December 1997 upon reaching 57 years alleges
that he has been deprived of two pay fixation during retirement. Now,
even after about a decade of retirement, his pay fixations have
remained unresolved and his pension delivery has stuck therefore .

These two cases are concerned with two different types of retirement: one
regular, the other irregular. But both cases involve corruptions like partial
deprivation of pension and undue delay in pension payment.
Non-payment of pension can also be as strange as the following
incident. A woman from Kumarkhali, Kushtia was receiving pension of
her husband, who was a retired Ansar commander, from 1984 upon his
death. In 1998, the pension suddenly stopped. Then in 2000, she again
received few months pension. Then again she has not been receiving
any pension.
Like these cases there are more people who deserves to receive their
pension but they yet didnt received properly due to the corruption system in
our country.

Aging issues in Bangladesh

This is a huge factor that has made a vast change in our country as well as in
our economy. It is an emerging issue in Bangladesh. With the improvement in
health care and increased life expectancy it is becoming a vital problem in
the developing countries including Bangladesh.
Presently about six percent of the populations are older i.e. 9 million
people. By 2025 one in ten persons will be elderly i.e. 18 million
people.
The massive number of aged people creating burden on government
budget, because of an ageing society should not be put in a light note.
It is been a severe problem with regard to ageing will occur in the
country which will affect the economic and health sectors.
Reasons for aging issues of BD:
Generally speaking ageing is an outcome mainly because of
declining fertility and mortality.

 Population ageing is likely to have the greatest impact at the

state level on expenditures for long term care and security for
the older poor.
In view of the problems of providing for the needs of the older
people particularly in the area of social security and health,
ageing will modify age at retirement, migration behavior, housing
and living arrangements for the old age.
With increase in elderly persons, issue of dependency and
potential support is cropping up. Thus ageing issues are coming
into limelight for policy formulation by public bodies and
intervention by all segments of the society.
Here is the scenario of the increase of elderly person in BD since
1980 to 2010 and also projected ration of the elderly person till
2015 are given and the rate is immensely increasing and its and
alarming sign for the economic growth of Bangladesh.

Yea

Total Population in

% of elderly people above 60 in

Bangladesh

Bangladesh

198

(in million)
88,221

5.28

0
198

99,373

4.99

5
199

1,09,465

4.87

0
199

1,18,616

4.89

5
200

1,29,155

5.11

0
200

1,40,566

5.48

201

1,51,799

6.05

0
201

1,61,540

6.94

Conclusion
The existing retirement and pension system in Bangladesh has a very limited
coverage because only government employees are benefited from this
policy. But we due to enormous growth of the private sector firms, a huge
number of qualified graduates are becoming interested to work in the private
companies. Sometime because of the higher salary and often for the
flexibility or may be completely for personal reason we are choosing to work
in the private sector. But as most of the private companies dont have a

retirement plan incentive with the existing salary package, our young
generation is losing the financial security and stability they need after their
retirement. So, it is very important that all the companies in the private
sector understands the need of having a retirement plan not only for
ensuring a better future for their current employees but also to use
retirement plan policy to attract, motivate and retain talented people for
continuous improvement.
Highlighting the pension system in Bangladesh, It is seen that public pension
is the prime social security mechanism of Bangladesh and a major area of
public spending. With pensioners and their dependents together, large
segments of the countrys population are beneficiaries of pension. Therefore,
male governance and corruption in pension delivery is affecting all of them.
It is seen in the research that public pension is in fact a package of benefits
offered by government to all or parts of retired public employees. These
benefits draw their legal basis from different laws, rules and regulations. The
pension benefits and the relevant legal framework have developed over
many years beginning way back before emergence of Bangladesh.

Recommendation
Considering the issues in Bangladesh, the Government should take serious
actions to overcome
the corruption
Measure should be initiated for the welfare of the elderly population
which should include the following:

- medicines at reduced cost

- free treatment
- health care near the residence
- home care by health workers
- increased old age allowance
- shelter and food provide all the
employees a portion of pension
The prevailing pension system should be improved to provide more
security to the retired government employees at the old age. 100%
pension instead of 80% should be provided to the public servants.
Government should formulate policies/laws for providing pension and
retirement benefits for the workers/employees of the agriculture and
industrial sectors so that the
workers/employees can survive economically in their old age.
The existing retirement and pension system in Bangladesh has a
very limited coverage. This should be extended to cover the entire
formal sector of the economy.