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 1996-2000 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 government’s 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 hasn’t 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 fiftyseventh 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 pensioner’s 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 didn’t 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.


Total Population in Bangladesh (in million)

% of elderly people above 60 in Bangladesh

1980 1985 1990 1995 2000 2005 2010 2015

88,221 99,373 1,09,465 1,18,616 1,29,155 1,40,566 1,51,799 1,61,540

5.28 4.99 4.87 4.89 5.11 5.48 6.05 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 don’t 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 country’s 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.