Dechen Dolkar

The Good Governance Committee of the National Assembly tabled a motion calling for the enactment of a Pension Act to address critical challenges faced by the National Pension and Provident Fund (NPPF) yesterday.

The motion was presented by the Good Governance Committee, which highlighted the absence of a National Pension Policy, despite the NPPF’s 42-year history as a state-owned enterprise.

The deputy chairperson of the Committee, Member of Parliament (MP) from Khamdang Ramjar, Namgay Dorji, said pointed out that although a draft policy was submitted in 2018, the NPPF continues to operate under rules set by an executive order rather than a formal, comprehensive legal framework.

“The lack of a Pension Act has resulted in serious governance, management, and regulatory issues,” he said, adding that the NPPF’s inability to act with full autonomy limits its effectiveness in addressing these challenges.

The Committee stated that the absence of a clear policy has led to many civil servants voluntarily resigning before enrolling in the pension scheme.

According to the Royal Civil Service Commission (RCSC), 4,710 regular civil servants resigned between January 2021 and August 2024, representing 15.7 percent of the civil service workforce in just three and a half years.

The deputy speaker said that there is an urgency of taking radical measures to prevent brain drain and the loss of valuable resources.

The existing pension scheme, which only covers public servants, is a contribution-based system that currently benefits just nine percent of the population.

Although the Labour Act of Bhutan mandates private companies with more than five employees to enroll in the pension scheme, the NPPF lacks the authority to enforce compliance. This has created a significant gap in the country’s social security coverage.

The Committee also flagged the growing disparity between the number of pensioners and contributors. With life expectancy on the rise, the number of retirees is increasing, while the membership base remains stagnant.

Moreover, NPPF funds are primarily invested in loans to financial institutions at minimal interest rates, yielding low returns. Restrictions on external investments further limit the potential growth of the fund.

Currently, NPPF operates within the bureaucratic framework of the Ministry of Finance and the Royal Monetary Authority, which restricts its autonomy and ability to diversify investments, unlike other corporate entities. This structure has hampered efforts to maximise profits and improve benefits for pensioners.

The maximum monthly pension currently stands at Nu 35,344, while the minimum is a mere Nu 780. Around 10 percent of retired civil servants receive pensions below Nu 2,000, which is often inadequate to cover basic living expenses. For many retirees, their pension is their only source of income.

The Committee recommended strengthening social security for senior citizens in light of Bhutan’s rapidly aging population, projected to reach 7.4 percent (65+ years) by 2027.

The MPs urged the need for immediate policy interventions to make pensions more attractive and ensure sustainable social security under the NPPF.

Established on March 30, 2000 as an autonomous agency by executive order, the NPPF currently has 61,565 registered members, including 10,284 pensioners.

Following a vote of 39 in favour, three against, and two abstentions, the National Assembly adopted the motion, directing the Ministry of Finance to draft a National Pension and Provident Fund Bill for submission to Parliament. The Bill will be tabled in the upcoming winter session, after consultations with key stakeholders.