The news is that the National Pension & Provident Fund (NPPF) stands at precarious spur. If there is no significant reform, civil pension scheme will last only until 2042, and the armed forces’ pension scheme until 2039.
As we report on pension schemes and its sustainability in our paper today, the message is that we should be begging for a major reform. It is a new dawn today and not all mornings are sunny indeed. Mists and clouds of prosperity often have us looking for a way out.
And way out of status quo is what we need today as our demography and allied realities are rapidly changing because dreams, however good or bad, do not last long. Everything depends on human perspicacity and the will to turn them into reality.
Bhutan is an old nation with young population. It is a society that woke up late to development and covered amazing heights and distances. That has been our pride. We made the run we had to. Our successes have also led to some tough challenges that we need to tackle as they are witin our reach.
For a pension fund to be sustainable, the rate of contributions should meet current service cost and payment of benefits. According to NPPF’s annual report, its funded ratio currently stands at 50 percent for the civil pension plan and 35 percent for armed forces’ plan. This means taking the funded ratios to confortable percentage of 100 or more will require huge funding from the government.
Unless the government steps in with specific and relevant measures, money outflow will be more than money inflow, shaking the entire system and the life of the institution itself. Only 3,436 new members joined the scheme in the last fiscal year. At the same time, 1,583 members exited from the scheme.
This means Bhutan’s young population will excert tremendous pressure on the scheme in the coming years. According to National Statistics Bureau, declining fertility and rising life expectancy will result in doubling of the number of older persons nearing retirement age by 2030.
One of the challenges facing the scheme is the rise in civil servants’ pay against the reality of shrinking civil service. This will cause imbalance in institution’s cash flow and add burden to its liabilities that is increasing. The investments that NPPF has made so far in bigger and promising projects are not paying off.
All these are stories of myopic planning that involves all ministries and sectors in the country.
What we need, as an immediate measure, is a policy at the very least, to guide the sustainability of the scheme for the service that the nation does to itself.