… mid-career employees resign to avoid entering into the pension system

Rinzin Wangchuk 

A forty-three-year-old woman tendered her resignation this month after serving more than 19 years in one of the corporations in Thimphu. Another two corporate employees, both men in their early 40s, are waiting to complete their 19th year in services.

Unlike other civil servants, they are not resigning to go to Australia or Canada to study or work.

For instance, the 43-year-old woman has decided not to join the pension scheme because she cannot wait till her minimum service retirement age of 56.

“Given the stressful work environment, heavy workload, and job insecurity, I don’t think I can work more than five years even if I join the pension scheme,” she said. “It is better to take my retirement benefits in lumpsum payment of accumulated contributions than to regret later.”




According to officials from National Pension and Provident Fund (NPPF), a total of 238 members who were in the service between 15 years and 20 years resigned last year to take lump sum payments. This is the highest number since 2017.

“However, employees resigning below 20 years were negligible compared to overall members exiting from the system,” the Pension and Provident Fund (PF) Chief, Tshering Dorji said.

Of the 3,637 members who resigned in the past year, only seven percent retired before 20 years in service. The record number of people who were in the service for less than five years was 62 percent or 2,239 including 1,321 local government leaders.

The total number of members who resigned in the last five years also indicated that the employees below 20 years in service were between seven and 10 percent only.




The NPPF saw 9,031 members leave the pension system in the last five years from 2017 to 2022, of which 865 or 9.6 percent members were between 15 years and 20 years in service. About 47 percent or 4,261members were below five years followed by 2,058 or 23 percent were 20 years and above. There were 1,981 members between five to 10 years and 1,187 members who served more than 10 years and less than 15 years.

According to the new chief executive officer (CEO) of NPPF, Dorji Penjor, the number of NPPF members who resigned from their services had increased from 29 percent in pre-pandemic to 49.5 percent in post-pandemic.

Some observers also pointed out that the number of employees who resigned from civil service and corporate agencies during the post-pandemic attributed to the Australia factor for which they needed lump sum amount to pay tuition fees.

“I am sure more than 85 percent of the employees must have gone abroad looking for a greener pasture,” a corporate employee said.




Of the 4,026 employees who resigned in 2021 and 2022, only 920 people served more than 20 years.

Sharing his personal experience and opinion, CEO Dorji Penjor said that there could be two categories for people opting for the pension system and others to take a lump sum amount. Some employees from civil service or corporate entities prefer to resign early to start businesses with the lump sum amount they are entitled to.

“Some prefer to join the pension scheme because their future is secured once they have resigned or superannuated,” he said.

Pension and Provident Fund (PF)

The pension schemes were introduced in 2002 as a mandatory retirement saving scheme for civil servants, employees of public corporations and enterprises and members of the Armed Forces to provide income security after retirement.

Both employees and employers make contributions to the pension and provident fund schemes. In the case of civil servants, an employee contributes 11 percent with the employer contributing 15 percent coming to a total of 26 percent. The custodian of the pension and PF takes 16 percent into the pension and 10 percent goes to the PF.




Both employers and employees of corporate and some SOEs contribute 15 percent each from which 14 percent goes to the PF. The pensionable age for an early pension is 51 years and 56 years for a normal pension.

Pension benefits are paid monthly to members whereas provident fund benefits are paid in lumpsum, with accrued interest, on retirement.

There are two tiers of the National Pension and Provident Fund Plan (NPPFP).

The Pension Plan, Tier 1, is a partially funded, pay-as-you-go plan, under which monthly pension benefits are provided upon the retirement of a member of Tier 1 or upon his/her permanent disability prior to his/her retirement. Upon the death of a member prior to or after retirement, monthly benefits are given to the surviving spouse and surviving children.




The PFP, or Tier 2, is a defined contribution, fully funded plan under which a lump sum benefit equivalent to all the contributions to a member’s Tier 2 account, together with returns thereon, is  paid on the date of his/her retirement or death while in service.

If a member has made more than 120 but less than 240 monthly contributions and in the event member leaves service by retirement, retrenchment and or under any condition except in case of the member’s death, such a member can exercise the option to receive an early pension or wait till minimum civil service retirement age for normal pension or withdraw lump-sum payment of accumulated contribution from Tier 1 account with interest.

The maximum retirement pension is 40 percent of the maximum ceiling of the salary scale of EX1 position level of the civil service. One pensioner receives a monthly pension benefit of Nu 37,042 which is the maximum and the minimum amount received by pensioners is Nu 5,510.




Currently, NPPF has 68,940 active members from civil service, corporations, state-owned enterprises, Armed Forces, and private entities. “Of this, we have 53,641 simultaneous memberships of tier 1 and tier 2 and another 15,299 tier 2 members today,” NFPF’s actuarial analyst Lekzin Dema said adding that there are 2,739 members (beneficiaries of PF) from the private sector.

The NPPF receives more than Nu 300M a month in pension and PF from its members while a monthly payment of Nu 80.428M is made to 9,320 pensioners today. Pensioners include their surviving spouses and children, orphans, permanent disability, and dependent parent benefits.

“With the economic slowdown, finding investment opportunities and building a diversified investment portfolio in the market is a major challenge the NPPF is facing today,” CEO Dorji Penjor said.

As of December 2022, NPPF has around Nu 52B in funds. The total loan portfolio including corporate and member loans stood around Nu 20B.