Businesses laud pension scheme for private sector

Business leaders and experts have lauded one of the four packages of a universal pension scheme (UPS) meant for employees of private companies, saying it would enhance post-retirement financial security and benefit employers too. 

Rolled out by Prime Minister Sheikh Hasina on August 17, the UPS aims to bring every citizen of the country aged above 18 under pension coverage.

Its four schemes require beneficiaries to pay instalments up to the age of 60, after which they will start to get a pension every month.

The Progoti scheme has three instalment options -- Tk 2,000, Tk 3,000 and Tk 5,000. Any private company deciding to avail the scheme has to pay 50 percent of the instalment while the employee has to pay the remaining 50 percent.

"It is something of a relief for the corporate sector as the government has taken the responsibility of providing retirement benefits," Md Saiful Islam, president of the Metropolitan Chamber of Commerce & Industry, Dhaka.

It is a time-befitting decision of the government through which the country's millions of private sector employees can benefit, he said.

The UPS will in a way act as social safety net programmes just like those in developed countries, enhancing the country's image, he said.

"As the private sector employers are already ensuring gratuity and provident funds for employees, the corporate sector should naturally take up this opportunity," said Islam.

"We have to contribute to the UPS by ensuring enrolment and the government will take up all responsibility," he said.

For instance, if a company that had availed Progoti falls in financial trouble or goes bankrupt, the government will automatically take over the responsibility of its employees under the UPS, he explained.

Till date only those in public service used to get pension after retirement but now private sector employees will also get the same benefit, he said.

The government has introduced the UPS to ensure social security of the private employees and general people, said Jashim Uddin, the immediate past president of the Federation of Bangladesh Chambers of Commerce and Industry.

"We as employers set aside amounts for provident fund and gratuity of employees in bank accounts. If any organisation enrols for the retirement benefit, the same amounts will automatically be channelled to the government for the UPS," he explained.

The UPS is apparently a good move towards ensuring an inclusive social safety net for people of all sections, said Asif Ibrahim, chairman of Chittagong Stock Exchange.

"This Progoti scheme aims at protecting 100 million (private sector) people which is a shift from the conventional government pension scheme limited to the 1.4 million public servants," he said.

"Indeed, it will take some time to comment on whether it will be largely beneficial for the private sector or not," he noted.

However, Ibrahim pointed out some salient features.

The fund accumulating under the UPS is expected to be invested in profitable schemes, ensure low-cost long-term financing for development projects and reduce public sector borrowing from banks, he said.

This, in turn, may help the private sector to grow further and get access to larger credit for investments, he said.

On the other hand, a huge number of private sector employees will get the guarantee of a pension and enhanced financial security after the end of their employment, he said.

"However, we feel that extensive transparency and good governance are essential for this timely scheme to run and flourish," he said.

The UPS is a good scope for the corporate sector to ensure welfare of its employees in partnership with the government, said Towfiqul Islam Khan, research fellow at the Centre for Policy Dialogue.

He suggested that the government actively encourage the private sector to come under the Progoti scheme.

However, the UPS funds will need to be invested in income generating activities in a professional manner for securing adequate returns and turn the UPS in to a sustainable and reasonably profitable venture, he said.

Otherwise, it will be a burden for the government, he noted.