Challenges of Universal Pension Scheme in Bangladesh

As Bangladesh undergoes economic transformation and demographic changes, the need for a comprehensive social security system becomes increasingly pronounced. The Universal Pension Scheme (UPS) has gained attention as a potential solution to address the financial needs of senior citizens. However, implementing such a scheme is not without its challenges. This study delves into the challenges of UPS in Bangladesh, shedding light on the obstacles that need to be navigated.

Challenges of UPS in Bangladesh

The Universal Pension Scheme (UPS) is a government-run pension program that aims to provide financial security for the elderly in Bangladesh. However, there are a number of challenges to the implementation of the UPS, including weak governance, a lack of digitization, and a diverse population.

Qualitative research methods were employed to delve into the challenges of implementing the UPS. In-depth interviews were conducted with relevant personnel who possess insights into public financial management reforms and social welfare initiatives. Some insights were collected from social media to get opinions from the people. The challenges were categorized into three groups:

Challenges from Participants and Recipients

  1. Registration and Trust Issues: The challenge of registration and building trust is multifaceted. Bangladesh’s history of administrative complexities and discrepancies in resource distribution has led to skepticism among the population. Many citizens have experienced difficulties accessing benefits from previous welfare programs due to flawed registration processes. Therefore, instilling trust in the new UPS system is paramount. Clear and transparent registration processes, along with effective communication campaigns to inform citizens about the scheme’s benefits and eligibility criteria, are necessary.
  2. Informal Sector Dominance: A significant portion of Bangladesh’s workforce operates in the informal sector, characterized by cash-based transactions and irregular income patterns. Convincing individuals from this sector to commit a portion of their income to a pension scheme can be challenging. The irregular nature of their income might lead them to prioritize immediate needs over long-term savings. To address this challenge, the UPS needs to offer flexible contribution options that align with the income patterns of the informal sector. Moreover, financial literacy campaigns can play a crucial role in educating informal sector workers about the long-term benefits of pension savings.
  3. Private Sector Participation: Encouraging private sector enterprises to contribute to the UPS has proven difficult due to various reasons, including financial constraints and a lack of awareness about the scheme’s advantages. Offering incentives such as tax benefits or government contributions to match those of private enterprises could make participation more attractive. Collaborative efforts between the government and private sector stakeholders are essential to drive participation and ensure a sustainable pension system for employees in the private sector.
  4. Mental Shift on Savings: Changing the mindset of Bangladeshi citizens regarding savings and retirement planning is a significant challenge. Historically, savings have been associated with immediate needs and emergencies rather than long-term security. To overcome this challenge, educational campaigns and workshops should focus on the importance of retirement planning and the benefits of contributing to the UPS. Stories of successful retirees who have benefited from pension schemes can serve as inspiring examples.
  5. Gender and Demographic Diversity: Bangladesh’s demographic landscape is characterized by gender disparities and varied life expectancies. Women tend to outlive men, and their participation in formal employment is lower. Therefore, the UPS must take these disparities into account by tailoring benefits to reflect gender-specific needs. Providing options for flexible retirement ages and addressing the financial needs of single and elderly women can ensure gender equality in social protection schemes.
  6. Addressing Vulnerable Groups: Bangladesh faces the challenge of river erosion and natural calamities that lead to land loss, rendering many individuals landless and vulnerable. Identifying and incorporating these vulnerable groups into the UPS is crucial. Innovative approaches, such as leveraging community-based organizations and local government bodies, can aid in identifying and supporting these marginalized citizens. Customized pension schemes that provide higher benefits for vulnerable groups can ensure their inclusion in the UPS and provide a safety net against the uncertainties they face.

Navigating these challenges requires a multi-pronged approach that involves collaboration between government agencies, private sector entities, civil society organizations, and international development partners. By addressing these challenges systematically, Bangladesh can work towards the successful implementation of the Universal Pension Scheme and ensure a more secure and dignified retirement for its citizens.

Institutional and Governance Challenges

  1. Accountability and Transparency: One of the prominent challenges in implementing the UPS in Bangladesh lies in ensuring accountability and transparency in fund management. The country has witnessed instances of mismanagement and corruption in the distribution of welfare benefits. To overcome this challenge, the government needs to establish robust mechanisms for monitoring the flow of funds, ensuring that the allocated resources reach the intended recipients without any leakages or irregularities. Implementing digital platforms for fund management, where beneficiaries can track their contributions and benefits, can enhance transparency and accountability.
  2. Integration with Existing Reforms: Bangladesh has been undergoing various reforms in the public sector, including the adoption of digital platforms for financial management. Ensuring seamless integration between the UPS and these ongoing reforms is crucial. The challenge here is to align the pension scheme’s operational processes with the existing digitalization efforts. This requires careful coordination between different government departments and agencies involved in these reforms to create a unified and effective system.
  3. Efficient Fund Management: Effective management of the pension fund is essential to ensure that contributions are invested prudently and generate reasonable returns. Bangladesh’s banking sector has faced challenges in terms of governance and efficiency. Therefore, it is imperative to establish stringent guidelines for fund investment, appoint experienced fund managers, and regularly monitor their performance. The development of a robust investment strategy and risk management framework will be critical to safeguarding pension funds and maximizing returns.
  4. Digitization Challenges: While Bangladesh has been making strides towards digital transformation in public services, challenges remain. The successful implementation of the UPS hinges on a digitized infrastructure for registration, contribution collection, and benefit distribution. Ensuring that digital platforms are user-friendly, secure, and accessible to all citizens, including those in remote areas, is a significant challenge. Adequate training and support must be provided to both beneficiaries and administrators to effectively utilize the digital system.
  5. Public Perception and Participation: The success of the UPS depends on the public’s perception of the scheme’s benefits and effectiveness. If citizens perceive the pension system as cumbersome or ineffective, it might deter their participation. Establishing a positive image of the UPS requires effective communication campaigns that highlight the scheme’s advantages and address misconceptions. Engaging with citizens, civil society organizations, and community leaders to gain their trust and involvement is crucial for the scheme’s long-term sustainability.

Religious Challenges of the Universal Pension Scheme (UPS) in Bangladesh:

The introduction of the Universal Pension Scheme (UPS) in Bangladesh marks a commendable effort towards providing financial security to citizens during their retirement years. However, it’s important to address the religious challenges that arise from the current structure of the scheme, particularly in the context of Islamic principles.

1. Concerns of Riba (Usury) and Garar: One of the main religious challenges associated with the UPS in Bangladesh is the concern of riba, which refers to usurious transactions involving interest. Islamic finance principles strictly prohibit engaging in transactions that involve riba. The conventional structure of the UPS, which involves citizens depositing money at a fixed rate and receiving additional money in the form of a pension, resembles an interest-based transaction.

2. Need for Interest-Free Alternative: Given that a significant portion of the population in Bangladesh adheres to Islamic beliefs and principles, there is a genuine need for an interest-free alternative to the current UPS structure. The participation of devout Muslims in a scheme that involves riba would be in conflict with their religious values. To ensure the inclusivity of the scheme and cater to the religious sensitivities of the population, an interest-free alternative is essential.

3. Islamic Banking Preference: Bangladesh has witnessed the rise of Islamic banking and finance due to the strong preference of many Muslims to avoid engaging in usurious activities. Islamic banks in the country have attracted a substantial customer base, reflecting the demand for financial products and services that adhere to Islamic principles. This trend underscores the importance of considering the religious preferences of citizens when designing financial schemes such as the UPS.

4. Ensuring Universality: The concept of universality implies that a scheme should be accessible and applicable to a wide range of individuals, regardless of their backgrounds or beliefs. The current structure of the UPS, which raises concerns of riba, might hinder the participation of a significant segment of the population. If a substantial portion of the population refrains from participating due to religious reasons, the scheme might not achieve its intended universal coverage.

5. Seeking Guidance from Ulama: To address these religious challenges, it’s crucial for the government to seek guidance from learned ulama (Islamic scholars) who specialize in Islamic finance and jurisprudence. These scholars can provide insights and recommendations on how to structure an interest-free pension scheme that aligns with Islamic principles while still achieving the goals of the UPS. Their input would be essential in ensuring that the scheme is widely accepted and embraced by the population.

6. Importance of Inclusivity: The success of any pension scheme, including the UPS, lies in its ability to encompass a broad spectrum of participants. By offering an interest-free alternative, the government can ensure that the scheme truly reflects the aspirations and values of the majority of the population. This inclusivity not only respects religious beliefs but also strengthens the overall participation and effectiveness of the scheme.

So, while the introduction of the Universal Pension Scheme in Bangladesh is indeed a commendable initiative, it’s important to acknowledge and address the religious challenges posed by the current structure. By designing an interest-free alternative that adheres to Islamic principles and seeking guidance from Islamic scholars, the government can create a more inclusive and universally accepted pension scheme that caters to the diverse beliefs of the population.

Addressing these institutional and governance challenges will require a comprehensive strategy that involves collaboration between government bodies, financial institutions, technology experts, and civil society organizations. Learning from both domestic and international best practices can guide the development of effective solutions tailored to Bangladesh’s unique context. By addressing these challenges head-on, Bangladesh can establish a robust and well-governed Universal Pension Scheme that ensures the financial security and dignity of its aging population.


Implementing the Universal Pension Scheme (UPS) in Bangladesh presents multifaceted challenges that require careful consideration and comprehensive planning. From ensuring proper registration and trust-building among beneficiaries to addressing issues related to institutional governance and efficient fund management, each challenge requires a tailored approach. Successful implementation hinges on a collaborative effort between various stakeholders, the integration of reform initiatives, and a proactive approach to address the unique demographics and cultural context of Bangladesh. By taking these challenges into account, policymakers and relevant authorities can pave the way for a more secure and dignified retirement for the country’s senior citizens.

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