Govt renews bid for contributory pensionThe government has initiated process to formulate law for implementing contributory pension system in civil service as announced in the budget for the current fiscal year.
The government has initiated process to formulate law for implementing contributory pension system in civil service as announced in the budget for the current fiscal year.
Amid concerns that the current practice of national treasury paying for all pension liabilities may not be sustainable, the government has proposed the contributory pension system in the Federal Civil Service Bill.
The move comes in line with the recommendation of the Federal Administrative Restructuring Committee (FARC). In the new arrangement, both the government and employees contribute specified amounts of money to be deposited to the pension fund outlined in the draft law. The fund will pay pension to retired civil servants.
As per the bill sent by the Ministry of Federal Affairs and General Administration to the Law and Finance ministries for their opinion, civil servants appointed after the new law comes into effect will get pension under the new system.
It would not apply for civil servants recruited before the legislation is passed. As per the bill, those who receive contribution-based pension cannot enjoy the same facility as officials serving now would be entitled to post retirement.
Civil servants working at present, if unfit to serve due to medical reasons, can be retired by adding seven years to their service period. But this provision will not apply to new civil servants.
Kashiraj Dahal, coordinator of the FARC, said they recommended an end to the existing pension system as it is unsustainable.
Although efforts have been made to implement contribution-based pension in civil service, the government has stated the plan in the current fiscal budget even for teachers, and personnel in the Nepal Police, Armed Police Force and the Nepal Army.
Although successive governments have announced to introduce the new pension system, it has yet to be implemented. Former finance minister Bishnu Poudel had also announced it in the budget for the fiscal year 2016-17.
The Auditor General’s Office has long been recommending the system for reducing ballooning recurrent expenditures. According to the 55th annual report of the OAG, the government spent Rs37.1 billion in pension payment in the fiscal year 2016-17, a whopping 7.19 percent of total recurrent expenditure.
The government has allocated Rs46.86 billion for pension and disability allowance in the current fiscal year. The state’s spending on pension has been rising steadily in recent years with the government spending Rs26.01 billion in the fiscal 2015-16 and Rs34.98 billion in the fiscal 2016-17 under the heading.
“The existing pension system does not seem to be sustainable as it increases every year,” said Baburam Gautam, deputy auditor general at the OAG. “Rising pension amounts have added pressure to the national treasury that also bears the additional cost as payment to people’s representatives at the central, provincial and local levels.”
With the government allowing provinces and local governments to hire temporary staffers, recurrent expenditure is expected to rise higher. The government’s earlier efforts to introduce contribution-based pension had failed due to strong protests from employees’ unions.
Beginning with 2002-03, the government introduced a contributory pension system for newly recruited civil servants. Ten percent from employees of their salary and 10 percent from the government was deposited to the Citizen Investment Trust for four years until 2005-06. But the system was rolled back following pressure from employees’ unions after the People’s Movement II in 2006.