Gratuity, accidental disability facility planned for Universal Pension 

Highlights:

• Minimum contribution rate to be reduced
• 'Early pension' option to be introduced
• 20% of deposits can be withdrawn
• Introduction of lump-sum gratuity payment
• Immediate activation if one becomes physically disabled
• Changes likely from FY26

The government plans a significant revamp of its Universal Pension Scheme, introduced during the Awami League's tenure, in a bid to attract more subscribers.

Proposed changes include a reduction in the minimum contribution rate, the introduction of an "early pension" option allowing individuals to access funds before the age of 60, and a lump-sum gratuity payment.

The Universal Pension Authority is referring to the provision allowing individuals to receive monthly pension benefits before reaching 60 as "voluntary pension." This facility will be available to contributors subject to certain conditions. 

Furthermore, individuals who become physically disabled after enrolling in the universal pension scheme will have their pension benefits activated from the time of their disability.

In addition to this, subscribers will be able to withdraw up to 20% of their total accumulated deposits as a one-off payment for any urgent need—a feature currently absent from the scheme.

These proposed amendments, aimed at making the universal pension scheme more appealing, are expected to be included in the upcoming fiscal year's budget. A meeting is scheduled today between the chairman of the Pension Governing Body and the Finance Adviser Salehuddin Ahmed to finalise these proposals. The government intends to implement these changes from the next fiscal year.

Under the existing regulations, individuals aged between 18 and 50 can subscribe to the universal pension schemes. However, they are only eligible to receive monthly pension payments after the age of 60.

Md Golam Mostafa, a member of the Universal Pension Authority (Fund Management), told TBS that the new proposals are likely to be discussed and decided upon at today's board meeting.

He explained that there is a calculation determining the monthly pension amount based on the monthly contribution. If a subscriber opts for the lump-sum gratuity, his or her monthly pension will be reduced accordingly. Conversely, those who do not choose the gratuity will not see a reduction in their monthly pension.

When asked about the percentage of the total deposits to be set as the gratuity rate, Mostafa said it was not possible to comment before the board committee's approval.

Despite the official launch of the universal pension scheme on 17 August 2023, it has struggled to garner the desired level of interest from both resident and non-resident Bangladeshis. This is partly attributed to the lower interest rates offered compared to bank deposits and the limited additional benefits. While the government has undertaken various promotional initiatives to popularise the scheme, these efforts have not yet yielded significant success.

According to the Universal Pension Authority's data, a total of 373,741 individuals had registered for the universal pension schemes as of Monday. However, a significant number of these individuals are not regularly paying their instalments.

A Pension Authority official informed TBS that they believe the existing minimum contribution rates are too high. "With high inflation making savings difficult for most people in the country, the minimum contribution rates for the existing schemes will be reduced."

For the designed for the private sector, the minimum contribution rate of Tk2,000 could be reduced to Tk1,000. Similarly, the minimum contribution for the informal sector scheme might be lowered from Tk1,000 to Tk500.

The government had a strong interest in including expatriates in the universal pension scheme. However, the enrolment rate in the Probash (Expatriate) scheme has been very low. The minimum contribution for this scheme, currently Tk2,000, could also be reduced by 50%.