An argument for prioritizing pension benefits for ordinary people

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In Bangladesh, people have very limited choices to invest for their retirement or to invest the annuity they receive after retirement in rewarding portfolios. Illustration: Collected

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In Bangladesh, people have very limited choices to invest for their retirement or to invest the annuity they receive after retirement in rewarding portfolios. Illustration: Collected

The idea of ​​retirement crosses the human mind for various reasons. Physical and mental constraints and plans to start other exciting businesses are major factors that make people consider retirement. My discussion, however, focuses on the most common cause of retirement, which is reaching a certain age.

It is generally around the age of 50 that we begin to think about retirement. Suddenly, they realize that they are getting older and start to think seriously about life after retirement. Until then, this eventuality does not come to the fore, and rather remains latent somewhere in the back of the mind. Only a few far-sighted people, with big ideas for making better use of the next stage in their life, engage in serious thinking about retirement much sooner.

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The first thing people planning to retire consider is whether they are materially secure enough to carry on the rest of their lives, unless they are planning to do something financially rewarding after retirement. retirement. Even those with solid plans to engage in income-generating activities after retirement wonder if they would have enough resources to make a living until that plan is executed.

This latter group can be called “pseudo-retirees”, since they hardly retire from their working life. They simply go from their regular 9 to 5 job, after qualifying for retirement benefits, to do something else that they love and believe they are fit to do. Some are confident that they can better apply the skills they have learned in their work as an independent consultant, for example.

In Bangladesh, people have very limited choices to invest for retirement, or to invest the annuity they receive after retirement, in rewarding portfolios. So far, the best choice has been to invest in government bonds and fixed yield securities. Despite the declining rate of return of this method, it is still used largely due to the lack of sufficiently safe and reliable investment opportunities. The second most popular investment vehicle for Bangladeshi retirees is term deposits, the interest rate of which has also gradually declined.

Many financially better off fixed-income earners invest their money in acquiring assets such as land and real estate, primarily with the intention of falling back on them after retirement. A few others run small parallel businesses with partners to generate additional savings for their retirement lives. Some buy land in and around their village homes with the intention of going into farming after retirement.

As in developed countries and many developing countries, the concept of equity investing has yet to gain popularity among small investors in Bangladesh. Mutual funds comprising various stocks and / or bonds are available in these countries for fixed income earners to invest in preparation for retirement. They are formed taking into account the needs of a wide range of investors with varying levels of income. If necessary, adjustments within each set of mutual funds can be made to better meet the needs of individual clients.

With the rate of return on term deposits and declining bonds and government securities, now is the time for financial institutions to seriously consider introducing mutual funds into their investment portfolios. Such a portfolio, still unavailable in Bangladesh, has enormous commercial potential for financial institutions. If passed, this cutting edge step of these institutions will provide potential retirees and other small investors with more viable options for investing their retirement savings and money.

However, government regulators must have an effective mechanism of checks and balances in place for mutual funds to operate with an acceptable degree of reliability. Otherwise, potential consumers will not feel confident to put their hard earned money into such an investment portfolio.

Additionally, regulators need to check the activities of potential scammers early on to ensure investors are not being defrauded. Any indication of a financial institution trying to lure investors into their ungodly trap should be nipped in the bud.

Many low-income and fixed-income earners in Bangladesh experience immeasurable financial hardship after retirement due to insufficient pension benefits and the lack of feasible investment opportunities. The government should consider developing a national pension policy to alleviate this problem of national concern.

Employers should keep in mind that peace of mind is a key ingredient in improving work productivity. Along with other factors, persistent anxiety about life after retirement significantly hinders work productivity.

ASM Jahangir is a retired development practitioner with expertise in financial management.


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