Scheming pensions

Would you set aside a portion of your salary if, after you retire, you receive a comfortable pension every month? You probably would. Would you do so if the government matched what you contributed, and you received a bigger pension when you retired? You probably should.

But what if such a scheme is sustainable for only 30 years? Would you participate? I probably would – I’m 43 years old and I can expect to enjoy a pension till I reach 73. Naturally, anyone older than me would find the scheme even more attractive.

What if you are 35 years old and you retire at 60? You’d get returns for only five years before the scheme collapses. So you probably would not join. And if you are only 30 years old? You should not join. If you did, your monthly contributions would pay for my pension, and you wouldn’t receive any when you retire, because the scheme would have collapsed by then.

This is the reality of our pension scheme. It is sustainable for only 30 years (read Bhutan Times article). And it can get worse if the government dictates the conditions of the scheme. As, indeed, it already has by deciding to base pensions on final salaries (see the pay commission’s report and the government’s pay revision report, both published by the ministry of finance).

What the government should do is strengthen NPPF and give it independence. And then support the pension scheme to make it fully-funded. For that, members and their employers will need to contribute more; the retirement age will need to be increased; pensions will need to be more realistic; and the government will need to make big subsidies to pay for earlier excesses and to achieve desired pension levels.

Correcting our pension scheme won’t be easy. But it can be done. And must be done. Now. Otherwise our pension fund will be nothing more than a pyramid scheme that benefits the initial few at the expense of the rest.


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  1. The pension scheme has been something of interest to the so called private sector also. They ahve approached the pension to accept thier employees PF contribution in their organization BUT ofcourse it is a lip service saying that they are looking into it and it will happen soon because after all private employees are also citizens of Bhutan. Well I call it lip service because about 10 years has gon by and the pension management is still saying the same thing.

    So, perhaps it has no authority to decide anything since it has no autonomy and it is governed by a bunch of Board directors who are also government servants who will sit there just for a sitting fee and not come out with anything concrete.

  2. Anonymous, let me share with you perspectives of a businesswoman.

    My company’s ability to provide a good credible pension fund gives a huge edge in attracting the best and the brightest to work with me.

    But, I also know that my company takes financial risks in offering a pension fund. There is the risk that I may not be able to meet the fund’s future commitment.

    When that risk happens, I lose the trust of my employees. That’s the end of my business, even before the pay-out money runs out.

    So, I make sure that my company’s pension fund is professionally managed, by an independent, reputable, and capable private funds management group (in India, to incur no foreign exchange risks, but also to broaden investment opportunities), with clear contractual terms of reference.

    My company’s business benefits of pension fund accrue to my company alone. Ditto, on all the risks.

    It’s a serious business. And it’s nobody else’s business — certainly none of the government’s business.

  3. Zekon la,
    You make a very interesting point about your pension fund being managed by an Indian fund management group. I am not sure if this is an easy task to find one in the first place and then follow the procedure easily. Currently, the provident fund of the private companies those that provide are with RICB – where the interest is very less and it not managed properly. The procedures to avail a loan against this money is lengthy and the monthly statements are inaccurate as well as delayed by five to six months. So an alternative would be good like the NPPF to which we cannot have access. The Indian situation you are mentioning seem far fetched that I almost cannot envision how it can happen like the PF money of our employees from Bhutan to be invested in India. Perhaps, you are one dynamic Business woman that we need to look up to to learn how it happens. Just wish it was a simple solution.

  4. What is NPF trying to do? if it is trying to scare away people from opting for the pension scheme by mentioning the non-sustainability after 30 years, then they should increase the 10 year period after which ppl fall into the pension scheme compulsorily. PPl at this productive and prime age are capable of managing their future by themselves.

    if not, NPF as a institution has been set up to manage the pension funds, not just sit on it. Why aren’t they looking at ways of mitigating the risks and growth of income? why are they not looking for a commercial banking or a insurance license? why are they providing loans at the lowest interest rate in the market? The question in my mind is, are capable and responsible people managing my insurance of the future?

    I think our country’s situation is not as perilous as Japan or developed countries where it is projected that a productive few has to sustain the many un-productive.
    I am just wondering if this like the old policy of “population planning” ( because everywhere in the world governments were doing that), only to wake up one fine day to find that our population is so small that we should have encouraged population growth instead.
    The pension system of our country is definitely not in the same situation as that of developed countries.

  5. can someone please explain to me why the pension based on final salary is worse than the average civil service salary?

  6. I read pension scheme in other nations. Pension based on final salary is more beneficial to us than the average salary. It’s true friends.

  7. I heard NPPF has most capable and professional people trying to help and make our pension more beneficial and meaningful to us. We appreciate the NPPF as it has helped to reduce most of the lending rates of banks. I carefully read the pension proposal in the Pay Commission Report. Two things were found interesting to me. (i) Enhancing retirement benefits including gratuity were proposed by NPPF. (ii) cost of living indicating to increase pension. These are commendable job

  8. thank you, this gives me an idea for my thesis topic. I already have one but this issue seems more interesting.


  1. […] we voiced concern that the NPPF pension scheme was sustainable for only 30 […]

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