The Foundation Stones for a Private Pension Fund in Bangladesh

Abstract

The current government of the People’s Republic of Bangladesh, led by the Prime Minister Sheikh Hassina, is committed to introducing a pension scheme for the privately employed citizens of Bangladesh by 2018. This private scheme will seek to reinforce and extend the present coverage of the Provident Fund for government employees and the age pension within the government’s social security programs. Drawing on the experience of countries such as Chile, Singapore and India, the authors note the scope for mandatory contributions to a private fund in Bangladesh from high profile export growth sectors, such as garments. They suggest that a fund that is government-controlled, centrally managed and professionally invested, similar to the model presented by the Indian National Pension Scheme (NPS), might provide a valuable starting point. The Indian experience however suggests the need for a deeper understanding of the objectives and benefits of the privately funded scheme and more targeted education of industry participants. Given the government’s wish to prioritise benefits for particular industry sectors and social groups in Bangladesh, the authors suggest that the Bangladesh government consider a hybrid model, beginning with the centralised management and investment of the fund but developing participation in the fund incrementally, industry by industry, to achieve the best possible coverage.