Tier 2: The National Social Insurance Scheme (NSIS)

As a means of preparing the country for a growing elderly population, the Government will take immediate steps to design a mandatory National Social Insurance Scheme (NSIS), based on the principle of employers and employees jointly paying contributions into a national social insurance fund. It will provide pensions as well as addressing other contingencies (such as disability, sickness, unemployment and maternity, as discussed in other sections). Initially, the NSIS will be aimed at those in the formal sector from whom contributions can be collected relatively easily on a mandatory basis but will gradually be extended to the informal sector. To prepare specific proposals for the NSIS, the Government will create a NSIS Commission – under the joint leadership of the Ministry of Finance and Ministry of Social Development – to undertake a comprehensive review of options. The NSIS Commission will commence its work in July 2014 and report to the Cabinet by June 2015. Cabinet will agree the specific design of the NSIS, based on the recommendations of the NSIS Commission and consultations with private business enterprises. The NSIS legislation will be sent to the Parliament in December 2016. Implementation will commence in July 2017.

The basic principles for the design of the NSIS will be:

  • The pension should be actuarially sound and financed entirely from contributions, with no subsidies from government.
  • It will be managed by a semi-autonomous organisation (the NSIS Authority) that will be overseen by the proposed Ministry of Social Development.
  • The age of eligibility for the NSIS will be set during design to ensure the fiscal sustainability of the scheme.
  • The Government will maintain current pension commitments to civil servants.
  • A minimum pension will be established for those who have contributed for at least 15 years, irrespective of the level of their contributions. This will ensure that the first pensions can be delivered by 2032, a few years after over-60s reach 10% of the population.  Investment decisions for the funds of the NSIS will be independent of government. The NSIS Authority will be tasked – through legislation – with maximising the profits of investments, minimising risk, and ensuring that 60 percent of investments are within Bangladesh.

The NSIS is a core component of the Government’s long-term vision for social protection in Bangladesh and will play a major role in enabling Bangladesh deal with the challenge of ageing. It is expected that the NSIS will gradually extend its coverage so that, over time, universal pension coverage will be achieved in combination with Citizens’ Pension.