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Bhutan Observer
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Pension is for old age
NPPF Management, July 17, 2013
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The National Pension and Provident Fund (NPPF) is writing to educate our members on the pension system in Bhutan in view of the concern expressed by some of our members in your newspaper issue of 28th June 2013.

This is to explain that the National Pension and Provident fund operates two schemes – the pension scheme and the provident fund scheme. The schemes have been designed in such a way that when a member retires, he or she will be entitled to two benefits, mainly pension, which is paid on a monthly basis, and the provident fund paid lump sum.

When the pension scheme was conceived, it was formulated taking into account the views and recommendations of the members after wide consultation. In order to protect the interests of the members, the National Pension Board has been set up with representations from all the stakeholders. The Board ensures that the concerns of the members are addressed appropriately while at the same time ensuring sustainability of the scheme.

In order that all members are well informed on the pension scheme, the NPPF is making its best effort to reach out to every member possible through direct contacts and agencies as well as through our website, which can be visited at all times.

Pension by definition is an old age retirement benefit that is payable when the member superannuates from the service. It is an arrangement that protects members from reduced earnings in old age after exit from service. Even as per our pension policy, a member is eligible to claim pension only in old age after exit from service and is no longer able to work. However, provident fund benefits are paid on exit from service irrespective of age. For the very reason to protect members from uncertainties, family members are covered under the scheme. In case a member dies while waiting to avail pension or while receiving pension, the surviving spouse and children are paid the benefits for their welfare.

Since pension is paid during old age, a member is expected to work and contribute productively to the economy until he/she reaches the old age or at least a minimum of 56 years of age. This is because pension is paid just for sustenance in old age and in no way be able to meet all the expenses of a member. As per the current design, contributions, which are collected from members until the retirement age, are estimated to pay pension up to life expectancy. If the members live beyond life expectancy, the NPPF takes up the responsibility to pay pension even if the contribution accrued is not adequate. If every member does not contribute enough, at least for 20 years and take all their benefits in lump sum, then the principles of pension system will be defeated and it will not sustain in the long run. It will exert pressure on the pension fund because there will be less inflow of funds to meet pension payments. This will leave many people without income security at old age despite the fact that they have contributed and worked during their youth and productive age.

The pension scheme plays a significant role in Bhutan in preventing old age poverty. It also contributes in fueling the country’s economy by making productive investments. Further, it has made differences to the lives of members by providing affordable loans to educate their children and also help build houses through affordable loans. Failure of pension schemes would be extremely costly and unfortunate for all members and the society as a whole.

Therefore, while we try addressing individual inconveniences, we have to take into consideration the welfare of all the members. In order to ensure that the members and their families are protected from uncertainties in the future, especially during old age, we have to ensure the sustainability of the pension system without unduly taxing the future generations.


National Pension & Provident Fund

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