Plan inclusive of those working outside government and corporations

NPPF: Fresh out of college and hunting for a job, Karma Choden, 23, can be called choosy. She wants a job that guarantees post retirement benefits.

Given her perseverance, a government job or a career in government owned enterprise is what she is after. “I am not good in managing personal finance so the job I am looking for should have inbuilt system to reward my service when I retire,” she said.

The job scenario is bad, but jobseekers like Karma, given the preference, always opt for jobs that ensures post retirements benefits. Studies pointed out that post retirement benefits is one of the deterring factors for employment in private sector.

Today there are 51,333 employees of government and corporation as members of the National Pension and Provident Fund (NPPF). This is just 15 percent of the national work force. Other organizations catering to social protection of work force like pension and insurance constitutes less than two percent.

Who are the remaining 85 percent?

Those working as general service personnel (GSP) and elementary service personnel (ESP) and national work force in the civil service, employees of local government, private sector, international agencies, NGOs and CSOs are not included in pension schemes, according to NPPF’s annual report.

Given the demographic changes and disappearance of traditional social support system with socio-economic development, NPPF stated that  new retirement policies, which would cover this group of population who have been excluded from social protection schemes are must.

A policy document for national pension scheme, which the NPPF drafted, is with the Cabinet.

“The intent is to provide guidance in the development of a social protection scheme that is sustainable, affordable, accessible, inclusive and broad-based,” the report states.

But this can only be achieved by expanding access and coverage through introduction of additional schemes and by ensuring that the schemes include those who are not currently members.

The existing NPPF schemes governed by the government executive order in 2002 cover only civil servants, employees of government owned and joint sector corporations and the armed forces.

However, the labour and employment Act requires employers to provide retirement benefits such as pension, provident fund and gratuity. This provision of the law is not yet fully enforced, especially in the private sector.

It is also a constitutional mandate of the state to provide security to its citizens in times of illness and disability or lack of adequate means of livelihood for reasons beyond one’s control.

The country’s has 345,786 active workers today and the number is increasing annually. This calls for a timely national pension policy that could be organized with the changing demography.

In its report, the NPPF has already identified some areas of reforms to be implemented should the draft gets Cabinet approval.

To ensure the sustainability of the existing pension, the report stated, there should be an increase in contribution and pension age depending on the situation and necessity.

As expanding the pension further is not affordable, it stated that there is a need to expand the provident fund to increase the coverage.

The NPPF also plans to launch a voluntary or self-contributory provident fund scheme for employees in the private sector, including self-employment agencies.

It has already implemented ‘lotedh scheme’ for senior citizens.

The first phase of reform would begin with including the ESP, GSP, work force and LG and government contract employees in the pension scheme. This will gradually expand to all agencies covered by the labour and employment Act.

Simultaneously, NPPF will also develop a system of voluntary contribution saving schemes for employees in the formal and informal sector including self-employed.

Albeit the efforts to enroll majority of the country’s workforce under the pension schemes, sustainability of the fund is already a concern for NPPF.

With the declining fertility and consistent increase in life expectancy, the National Statistics Bureau (NSB) expects the number of older persons in the population to double from 29,745 in 2005 to 58,110 by 2030. However, the working population is projected to grow by 10 percent in the same period.

This means that number of people retiring from service would double while those contributing to the fund would increase marginally. This calls for intimidation on the sustainability of pension funds.

The NPPF is therefore planning to invest in debt instruments like bonds, treasury bills and equity investments in state owned enterprises in the next five years, which are more secure. The report stated that a percent increase on the rate of return could push the pension sustainability by more than a year.

The annual report revealed that NPPF’s investment in bonds doubled from around Nu 2B in 2014 to Nu 4.1B last year. But its investment on loans and shares increased marginally during the same period.

Tshering Dorji