National Pension Management Act 2023 needs constitutional focus
The government of Bangladesh seems to have an opportunity to make history in designing old-age security programmes in a modern democratic governance structure
On the 24th of January, Jatiya Sangsad (JS) passed the Bill, National Pension Management Bill, 2022, whose primary objective is to help low-income Bangladeshis in their old age. It has become an Act after the President's consent, called National Pension Management Act (NPMA) 2023.
Before placing the Bill in the JS, it was posted on the Finance Ministry's website for public consultation. Then it was duly discussed and debated in the JS and eventually passed by voice vote on the 24th of January this year. Finally, print and electronic media have critically examined the Act's merits and demerits. The government has obtained an A+ in all these evaluations, except for some criticisms about its contribution to the programme and its financial viability.
Nevertheless, several issues about the Act are yet to be examined. One of them is the nomenclature of the programme, in which the keyword is the pension. This word is confusing, given the NPMA's vision and mission.
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According to the Online Etymology Dictionary, the term originated from the middle-English word, pensioun, in the late 14th century, which meant "a regular reward or annual payment out of a will or benefice. From the 16th century, it used to mean "an annuity paid regularly as a benefit due to a retired employee, serviceman etc. in consideration of past services, originally and chiefly by a government but also by various private pension schemes.
Thus, the ordinary signification of 'pension' is a regular payment made by a public or private organisation to its employees for their service for a minimum period. More specifically, receiving a pension benefit is directly related to providing service, i.e., the scheme is private and non-contributory because only the employees of the concerned agency were eligible for the benefit.
However, the industrial revolution in Europe created a different socioeconomic and political situation, which demanded a conception of pension that is not directly related to job retirement.
First, the industrial revolution replaced feudalism with capitalism. This economic transformation facilitated the emergence of the democratic system of government by reducing the influence of feudal lords and monarchs.
Second, the industrial revolution inspired rapid urbanisation. This process involved rapid rural-to-urban migration, making working people dependent primarily on wage incomes. As a result, working-class people faced economic insecurity in their old age when they could no longer work.
Finally, urbanisation and industrialisation disrupted the traditional home tie by breaking the extended family system. The older members of an extended low-income family depend upon their income-earning members' financial support and care. This family tie breaks down when the wage becomes the primary source of income.
This situation inspired some European governments to introduce some kind of financial help for the elderly. The literature describes this initiative as a social pension, which is different from the regular pension in that this scheme is not related to employment.
Here, as part of the state's social responsibility, the government makes regular monthly payments to its citizens after they retire from income-earning economic activities. The term social security, widely used in this respect, has come from this conception. Here, the primary criteria for pension are citizenship and age.
Germany was the first European country to introduce a low flat rate of pension to all workers who reached 65 in 1889. Denmark and New Zealand followed Germany's suit in the 1890s. In the 20th century, all developed countries and many middle-income countries implemented the idea of financially supporting their senior citizens.
The legal and practical coverage of social pensions has increased significantly. Over 90% of the elderly received social pension benefits in 34 countries between 2015 and 2017. However, the social pension programme's title and payment system vary from country to country.
For example, the social pension scheme in Canada is understood as the old-age security programme, which has two components – one is financial, and the other is healthcare. The financial component again consists of three programmes – old-age security (OAS) pension, Canada Pension Plan (CPP) and Guaranteed Income Supplement (GIS). Then, Canada administers a universal healthcare programme under which senior citizens are entitled to special facilities. Other developed countries also have similar programmes under different titles.
The history of social pensions, described above, has evolved continuously by recognising the programme as a state responsibility. The root cause is the developments in the governance of the public administration system, viz., democracy. Although this seems obvious, expert elites generally overlook their significance in analysing the issue related to senior citizens' financial and medical security.
In the late 19th and early 20th centuries, when the concept of social security developed, the democratic system of governance in the western world was in its infancy. Therefore, the philosophical foundation of democracy – people are sovereign, and leaders of the government in which this sovereign authority remains vested must be elected through universal suffrage – was very weak.
Accordingly, the idea, social pension, was used to imply a privilege that older people should obtain for being citizens of a country. It was not understood as a citizen's right to be financially and medically protected in old age.
This political perception changed dramatically after WWII for two reasons. First, the Bolshevik revolution in 1917 established a social system of government in Russia, which nationalised all significant sectors of the economy, promising that the government would meet the citizens' all basic needs.
More importantly, the Soviet Socialist Republics declared war against the western political system, whose economic foundation is the institution of private property. This cold war inspired western governments to improve their citizens' financial and medical security. Accordingly, expert analysts replaced social pension with the term social security.
The terms, pension and security carry very different meanings. Pension means an allowance received regularly from the government, while security signifies being free from danger or threat. While any employing organisation can offer a pension as a benefits package, only the government can guarantee an individual's security in old age.
Social pension is no longer an appropriate concept in a modern democracy. Accordingly, discarding the term, social pension seems suggestible. Moreover, the old-age security programme should be replaced with a new terminology - senior citizen security programme – to make the government's policy for senior citizens more consistent with the modern concept of democratic governance. The idea behind this suggestion is to understand the security of people in their old age as a state responsibility, which should not be affected by the policy of politicians in power.
No government has implemented the old-age security programme as its constitutional responsibility, i.e., as the citizen's right. Therefore, the idea is new to the governance horizon. The government of Bangladesh seems to have an opportunity to make history in designing old-age security programme in a modern democratic governance structure.
Dr Khandakar Qudrat-I Elahi/ Economist
