The Bangladesh Pension System

Abstract

AbstractThis descriptive piece discusses the multidimensional aspects of the prevailing pension system in Bangladesh and provides a visionary roadmap for designing a pension system in comparison to international policy views. In Bangladesh, some two million government employees are entitled to draw retirement pensions and so are the employees of the formal private sector. However, the large chunk of the workforce employed in the informal sector are out of the pension scheme. Within the limit of laws, rules and regulations, this chapter identifies the details of government pension schemes, key differences between the public pension schemes, and private pension plans. The public pension program follows the traditional unfunded pay-as-you-go system where the payment is made from budgetary revenue. In contrast, the private pension schemes are either defined-benefit plans or defined-contribution plans where the contributed amount is invested to generate pension payments in the future. The financial sector (e.g., private commercial banks operating in Bangladesh) is no exception from the above-mentioned corporate pension schemes. The study notes that there is a direct correlation between the tenure of service and the size (as a percentage) of pension benefit. This case is found to be true in both public and corporate pension schemes. This chapter also explores the regulatory framework of the pension system in Bangladesh and finds that the absence of one single comprehensive legal guideline for the pension system has made it complex to manage pension funds. There is more wriggle room to make the existing system more flexible and more pro-employee.