The 'Universal Pension Plan' will facilitate "inclusive development" in Bangladesh as it will provide much needed economic security to the poor and middle-class at a very sensitive stage of their life.
"While I have still not seen the details of the plan, the skeleton of the plan as reported in different newspapers offer hope that the state is formulating a plan that will help tame inequality and support families who struggle to save for their retirement," Dr. Ashikur Rahman, a Senior Economist, at the Policy Research Institute (PRI), told Bangladesh Post in a reaction.
"The long-run real interest rate offered – that is adjusted for around 5% inflation for 42 years – stands at around 3.75% to 4%, which is very decent," he said.
Finance Minister AHM Mustafa Kamal on Wednesday said the pension scheme will be introduced within six months to one year for all citizens over the age of 60.
He said laws and regulations would be formulated within this period and a body would be formed to oversee the scheme.
Currently, only government employees in the country get pensions. But the ruling Awami League had promised to bring everyone, including private employees, under a pension scheme in its manifesto for the 11th parliamentary elections.
"For this pension plan to be sustainable, however, I think the Government must form a “pension fund” from which it can borrow at the rate it is currently borrowing using the savings certificates," Dr Ashikur Rahman said.
"This will ensure the pension fund is protected and no macro-economic pressure is created due to long-run debt," he said.
"On the other hand, the Government should avoid the temptation to use the money contributed in the pension scheme as free money – used to support budget deficit – as it will create a large contingent liability for the state," said the Senior Economist.
