reforming social pensions in Bangladesh

This post, more accurately, is on the need for improvement of social pensions in Bangladesh. The policy recommendations, in the opinion of TdJ, are not helpful.

Most of the elderly people in Bangladesh suffer from basic human problems, such as poor financial support, chronic diseases and absence of proper health and medicine facilities, exclusion and negligence, deprivation and socio-economic insecurity. ….

The Old Age Allowance (OAA) is the most significant [pension] scheme, in terms of coverage, as it provides social protection in old age. The tax-funded OAA is a social pension paid to poor older people. The scheme … covers 30 percent of the population aged 60 and over with low monthly transfer amount of Tk. 500 [US$6.42] per beneficiary, requiring budgetary allocation of 0.14 percent of the GDP. This figure compares poorly with the pension scheme of Nepal – (expenditure of 0.35 percent of its GDP, covering over 70 percent of older population) and Lesotho (expenditure of 1 percent of its GDP covering over 70 percent of the older population). Furthermore, the majority of poor older people in Bangladesh miss out from the OAA benefits mainly due to targeting errors (over 50 percent of benefits go to non-poor older people and almost a third of the benefits go to those below the age of eligibility).[Emphasis added.]

Instead of the currently pursued piecemeal approaches, Bangladesh needs to adopt a comprehensive plan of action to tackle this issue. The plan of action may include redesigning the existing Old Age Allowance system by introducing a comprehensive pension under a three-tiered system {Tier 1: a tax-financed benefit that provides less well off older people with a minimum income guarantee; Tier 2: a mandatory contributory pension scheme for the formal sector workers; and Tier 3: voluntary pension schemes – managed by the private sector (often employment-based schemes), which people can opt for if they desire an additional income in old age}. A care system can also be implemented and a number of economic and non-economic entitlements for elderly people also need to be introduced, as recognised in the recently cleared policy on ageing population in Bangladesh.

Bazlul Khondker, “Taking care of our senior citizens“, The Daily Star, 4 October 2015.

Bazlul Haque Khondker (PhD University of Warwick) is Professor of Economics at Dhaka University.

For more information, click on the link above, and download previous TdJ posts here and here.

The writer provides an excellent description of the shortcomings of the current system, then, surprisingly, recommends expansion of the same failed policy of targeting: a means-tested guaranteed income for “less well off older people”, supplemented by introduction of “a care system … and a number of economic and non-economic entitlements”.

This newspaper column illustrates the all-too-common triumph of hope over reason.

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