The National Council’s Good Governance Committee is calling for reforms to strengthen retirement benefits and the pension and provident fund’s sustainability. A review report by the committee warns that rising living costs, inflation, and an ageing population are putting increasing pressure on the country’s pension and provident fund.
The report highlighted growing concerns that the existing pension benefit is insufficient to meet rising living costs and inflation.
For instance, an EX3 executive or director-level employee who rendered 36 years of service receives a monthly pension of nearly 23,000 ngultrum upon retirement.
In comparison, a P3 level or senior officer employee with 34 years of service receives around 15,000 ngultrum per month.
Those in the Elementary Service Personnel or ESP category, the lowest position level, receive only around 5,000 ngultrum after serving for 36 years.
“Some retirees could fall into poverty if reforms are not introduced. Therefore, we recommend reviewing key components of the pension system, including the replacement rate, pensionable service period, and employee contributions,” said Kencho Tshering, the chairperson of the Good Governance Committee, NC.
The report also raised concerns over the sustainability of the system and stated that it could face a gradual decline due to an ageing population and increasing life expectancy.
The committee recommended establishing a dedicated Pension and Provident Fund Act.
Kencho Tshering said, “International best practices emphasise that pension and provident fund institutions should function as independent legal entities. In view of the numerous constraints faced, it is high time to legislate a dedicated Pension and Provident Fund Act. This can strengthen governance, accountability, and independence.”
Other recommendations include separating pension and provident fund management, improving private sector participation, and increasing financial literacy on retirement planning.
The deliberation on the report will continue tomorrow.
Deki Lhazom
