Govt to take up scheme for private sector pension

The government is set to take up a $100 million project to introduce a private sector pension scheme and automate the insurance regulator.

The three-year project -- Bangladesh Insurance and Private Pension Market Development -- will be financed by the World Bank and the government.

The multilateral lender will provide $80 million and the government the other $20 million, said a finance ministry official, adding that the project is likely to get the nod from the WB board in March.

A meeting, chaired by Banking Secretary M Aslam Alam, was held yesterday at the finance ministry to lay the groundwork for the project.

“We are hopeful the government will be able to introduce the private sector pension scheme by 2018.”

Before introducing the project, opinions of all stakeholders, especially the business community, will be taken, Aslam said.

Subsequently, it was decided that a scheme will be rolled out under the National Social Security Strategy, which was prepared in November last year.

The banking division was given the task of introducing the private sector pension scheme.

As of now, it has been decided that there will be two bodies -- one in which the private sector jobholders will put in a certain amount and another that will invest the pooled funds for profitable ventures. From the profits the employees will be given benefits when they go into retirement.

The banking division will conduct a study to examine the viability of establishing a pension regulatory authority that will be responsible for supervising private pensions, thereby ensuring their integrity, fairness and financial sustainability.

For implementing the scheme, a fund will be created where employers and employees will jointly pay. A policy will be formulated about the formation of the fund and regulations of the contributions.

At the beginning, the fund will be managed by the Insurance Development and Regulatory Authority Bangladesh (IDRA) under the finance ministry.

Besides the private sector pension scheme, IDRA, Jiban Bima Corporation and Sadharan Bima Corporation will be automated under the $100-million project.

A banking division official said the IDRA does not have the capacity to monitor the insurance companies like the Bangladesh Bank does with banks. One of the objectives of the project will be to strengthen the IDRA, he said.