𝐅𝐢𝐧𝐚𝐧𝐜𝐞 𝐌𝐢𝐧𝐢𝐬𝐭𝐞𝐫 𝐑𝐨𝐥𝐥𝐬 𝐎𝐮𝐭 𝐏𝐞𝐧𝐬𝐢𝐨𝐧 𝐑𝐞𝐟𝐨𝐫𝐦 𝐈𝐧 𝐑𝐞𝐬𝐩𝐨𝐧𝐬𝐞 𝐓𝐨 𝐆𝐫𝐨𝐰𝐢𝐧𝐠 𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐚𝐧𝐝 𝐂𝐨𝐯𝐞𝐫𝐚𝐠𝐞 𝐈𝐬𝐬𝐮𝐞𝐬

…𝒇𝒊𝒏𝒂𝒏𝒄𝒆 𝒎𝒊𝒏𝒊𝒔𝒕𝒆𝒓 𝒄𝒊𝒕𝒆𝒔 𝒔𝒕𝒓𝒖𝒄𝒕𝒖𝒓𝒂𝒍 𝒇𝒍𝒂𝒘𝒔 𝒂𝒏𝒅 𝒍𝒊𝒎𝒊𝒕𝒆𝒅 𝒊𝒏𝒄𝒍𝒖𝒔𝒊𝒗𝒊𝒕𝒚 𝒊𝒏 𝒕𝒉𝒆 𝒑𝒆𝒏𝒔𝒊𝒐𝒏 𝒔𝒚𝒔𝒕𝒆𝒎 𝒂𝒔 𝒈𝒐𝒗𝒆𝒓𝒏𝒎𝒆𝒏𝒕 𝒃𝒆𝒈𝒊𝒏𝒔 𝒓𝒆𝒗𝒊𝒆𝒘 𝒐𝒇 𝒏𝒂𝒕𝒊𝒐𝒏𝒂𝒍 𝒑𝒐𝒍𝒊𝒄𝒚

By Kezang Choden

Finance Minister Lekey Dorji has announced major pension reform plans during a session of the National Council, highlighting serious concerns regarding the structure, long-term sustainability, and fairness of existing pension scheme. The announcement followed a question raised by Sonam Tobgyel, Member of Parliament from Trashigang, who pointed to multiple issues within the current system.

Sonam Tobgyel noted that pension payouts for retirees remain low and that the scheme provides limited coverage, reaching only a small segment of the population. He questioned the Ministry of Finance’s efforts to improve the national pension policy, with particular focus on the adequacy of monthly pensions and the lack of equitable adjustments when salaries of serving civil servants increase. He emphasised that one of the key problems lies in the structure of the pension scheme itself.

Currently, the pension system covers only around 70,000 individuals out of a population exceeding 700,000. A significant portion of citizens are excluded, particularly those who do not complete the full 20 years of service required for eligibility. According to the MP, this limitation weakens the pension fund and discourages workforce participation, ultimately affecting the country’s human resource potential.

Responding to the concerns, the Finance Minister acknowledged the complexity and urgency of pension reform. He said that strengthening the culture of retirement has been identified as a key national priority. A study is underway to assess the current state of the pension scheme, and its findings are expected to guide future policy decisions. Lyonpo also clarified that although Bhutan’s pension model appears to be contributory, it effectively operates as a pay-as-you-go system that depends on intergenerational support.

He stated that the Ministry is currently reviewing existing retirement policies, including the National Pension and Provident Fund (NPPF), by referring to international best practices. A comprehensive actuarial valuation and assessment of the pension system, which began last year, is one of the major initiatives currently in progress.
Adding a citizen perspective, Choney Dorji, a retired civil servant from Thimphu, described the current pension system as unfair and outdated. He explained that pensions are calculated based on the salary drawn before retirement, while government salaries continue to increase almost every year. According to him, this creates a growing gap between the pensions received and the rising cost of living, particularly in urban centres.

“We are receiving pensions based on an earlier salary scale, but spending in today’s market where everything is more expensive,” he said. He added that many retirees are struggling to survive on pension alone, especially in towns and cities where rent, food prices, and utility costs continue to rise. “Urban living is costly, and without a regular income or other sources of support, surviving on a fixed pension is a real challenge,” he added.

However, Choney Dorji acknowledged that some retirees manage better if they have strong family support, particularly from children. He noted that in rural areas, the situation is relatively more manageable due to lower costs of living, availability of home-grown food, and community support systems. He stressed the need for a pension scheme that considers present-day economic realities and ensures dignity for all retirees, regardless of where they reside.
The Finance Minister acknowledged that current pension system reaches only about ten percent of the total population. “We assume that the government will take care of the rest, but the question remains—how do we address the ninety percent who are not covered?” he asked during the session.

He explained that the existing pension formula, based on the last drawn basic pay, currently offers a maximum pension equivalent to 40 percent of a Cabinet Secretary’s salary and a minimum of 40 percent of an O-level civil servant’s salary. According to the Minister, these percentages were determined through political decisions rather than actuarial evaluations. He said this reflects the need for professional and evidence-based restructuring of the system.
To expand coverage beyond the formal sector, the Prime Minister’s Office and the Ministry of Finance are working together on a broader social protection framework. As part of the reforms already underway, the government has extended the required service period for pension eligibility from 20 years to 23 years. The NPPF has also been directed to improve the quality of its investments in order to ensure the long-term financial sustainability of the pension fund and secure better returns.

Choney Dorji expressed cautious optimism about the proposed reforms. He said the changes could help address the longstanding challenges faced by retired individuals like himself. “We will truly benefit from the reform only if the pension is calculated based on present economic realities,” he said. He also suggested that the government consider adopting a differentiated approach for urban and rural retirees. “Retirees living in urban areas face higher living expenses, including rent, utilities and basic goods, whereas those in rural areas can often rely on subsistence farming and lower costs of living,” he explained. According to him, a uniform pension policy does not reflect the financial challenges faced by retirees in towns and cities.

He further added that pension reforms often focus only on serving civil servants, overlooking the difficulties faced by those who have already retired. “No matter how many changes the government brings, it always seems to be in favour of the serving civil servants. No one is really thinking about the retirees,” Choney Dorji said. He stressed that for many retired individuals, the pension is their sole source of income and urged the government to design policies that address their actual needs. “Retirees should not be forgotten, especially after having served the country during their most productive years,” he said.

The Finance Minister concluded by stating that the Ministry would continue to make dedicated efforts to address all concerns related to pensions. He outlined further plans including revising the retirement age, changing the age of pension eligibility, and improving the investment strategies of the pension fund to generate additional income.