Finance Ministry clarifies on 'Prattay Scheme'

Dhaka, Bangladesh Global: The Finance Ministry has issued a clarification on relevant issues of the recently introduced pension scheme titled "Prattay Scheme" for incorporating the staff of the self-governed, autonomous, state-owned, statutory or homogeneous organizations and their subordinate bodies in the Universal Pension Scheme.

The government started the scheme from July 01, 2024 for bringing people from all walks of life to a sustainable pension system. The scheme has been introduced for autonomous, self-governed and state-owned enterprises and their subordinate entities, among others, said the clarification.

Now, there are 403 self-governed, autonomous and state-owned organizations in the country. Among the organisations, around 90 are maintaining the pension system. The remaining organisations are under the Contributory Provident Fund (CPF). Employees of organisations under CPF benefits get lump sum gratuity, they do not get pension.

As a large number of people of the country, except for government, self-governed, autonomous and state-owned organizations, are out of a well-structured pension, the government has introduced a universal pension scheme to build a well-structured pension structure for people of all classes and professions.

According to Section 14 (2) of the Universal Pension Management Act, 2023, provision has been made for introduction of pension scheme for all the people of the country. All employees joining self-governed, autonomous and state-owned enterprises on or after 1 July 2024 will be compulsorily covered under the 'Prattay Scheme'.

The Finance Minister in his budget speech for the financial year 2024-25 has clearly mentioned that government employees joining on or after July 01, 2025 will also come under the universal pension.

A few more clarifications about the 'Prattay Scheme':
1. All teachers, officers and employees in service till June 30, 2024, will be entitled to all pension benefits as before.

2. Now, the Unfunded Defined Benefit System pension is in the government pension. As a result, as per requirement, all pension expenditure is met from budget allocations. For launching the Funded Defined Contributory system in pension management, like in other countries of the world, a fixed monthly deposit system has been kept from the salary. In the 'Prattay Scheme', the concerned organisation will deduct 10 percent or a maximum of Taka 5,000 which is less of the basic salary from the concerned officer or employee and the organisation will pay an equal amount of money. Then both the amounts will be deposited in the corpus account of the officer or employee.

3. Unfunded Defined Benefit pension system increases the financial burden of the government which is not sustainable in the long run. On the other hand, in Funded Contributory Pension System, a fund will be formed on the basis of contributions received and investment profits, so it is a sustainable pension system in the long term. It should be noted that the Funded Contributory Pension System has been in operation since 2004 in the neighboring country, India.

4. By introducing a new pension system, it will be possible to gradually bring people from all walks of life into a sustainable social security framework. It will be possible to ensure Financial Inclusion and Inclusive Development.

5. If a teacher of a public university is appointed to the same post or a higher post in his own university or any other university after applying through the appropriate authority, he gets service protection and pay protection, so it is not considered as a new appointment. In that case, he will have the opportunity to remain under the existing pension benefits. Only teachers and staff in public universities who are newly recruited on and after July 1, 2024 will be included in the 'Prattay Scheme'.

6. Even though the Universal Pension Management Act mentions getting pension from the age of 60 years, but university teachers will get pension for life from 65 years as they go on retirement from 65 years. In this case, the government will make necessary amendments to the law.

7. Lump grant, PRL and Provident Fund will continue like now.

8. In order to ensure the social security of the participant in the contributory pension system, the government has provided priority to monthly pension, not one-time. For this, the system of gratuity has not been kept, but the system of paying monthly pension several times more than the existing monthly pension has been kept. If Taka 5,000 is deducted from the monthly salary in the 'Prattay Scheme' and the same amount is deposited by the organisation, after 30 years a pensioner will get lifetime pension at the rate of Taka 1,24,660 per month. The amount of total deposit of his own income is Taka 18 lakh and if he receives pension for 15 years his total income will be Taka 2 crore 24 lakh 38 thousand 800 which is about 12.5 times of his deposit. Pensioners who survive for 30 years after retirement will get pension of about 25 times the amount of his deposit.

9. Under the existing system, pensioners get pension for life. In his absence the pensioner's spouse and disable children get pension for life. In the new pension system also the pensioner will get lifetime pension. In the absence of a pensioner, the pension is permissible till the remaining period of 15 years from the date of beginning of the pension for his spouse or nominee pensioner. For example, a pensioner gets pension for 5 years after retirement and dies, in this case his spouse or nominee will get pension for another 10 years.