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Surge in pension payments drains government coffers

September 01, 2018

Post Report, Kathmandu

Sep 2, 2018-

The government last year paid 250,089 pensioners a whopping Rs40.14 billion—which accounts for nearly a third of the total salary and allowances paid to serving public servants—a drain on state coffers. The number of pensioners in the country has doubled in the last eight years and the surge in pension payments increased sixfold in the same period.

According to the Pension Management Office (PMO), the number of pensioners accounts for 42 percent of the total government employees in service, largely due to the rise in the number of officials taking retirement in the last four years.

Records show that the number of retiring employees was moderate until 2013-14 but the numbers quickly escalated.

According to PMO chief Hemanta Raj Nirauala, one of the reasons behind this surge is the rising number of Nepal Army personnel opting for an early exit from service.

Army personnel are entitled to pension after serving for 16 years, the shortest period among the various government services. Eligibility for pension in Nepal Police is 18-20 years and based on rankings while it is 20 years for civil servants and teachers.

The number of pensioners in the Army has reached close to the number of serving personnel. In the past fiscal year, the number of Army pensioners stood at 77,125 while the number of personnel in service stood at 91,998, according to the website of the defence force.

The scenario is no different for civil service—79,198 civil servant pensioners compared to 87,753 in service.

Pensioners in Nepal Police and teachers are relatively lower compared to the serving numbers of Nepal Police and the Armed Police Force combined. There are a total of 51,587 pensioners. For teachers, it’s 42,169.

These figures from the previous fiscal years show that the pension payments are draining the state coffers and the early retirement rates have risen rapidly.

“Army personnel are retiring as soon as they become eligible for pension as there are better paid jobs available to them in foreign countries as ex-servicemen,” Niraula told the Post. In March, when Finance Minister Yubaraj Khatiwada presented the much debated White Paper on the country’s economic situation, he warned that the benefits enjoyed by retired employees had surged 156 percent in the last five years.

In line with Khatiwada’s warning, the government last week registered a bill on Contributory Pension system in Parliament. If the bill is endorsed, government employees, beginning the current fiscal year, will contribute six percent of the monthly salary to the plan and the government would match their contribution.

“One measure could be to increase the pension eligibility for civil servants and police personnel to 25 years and 21 years for Nepal Army personnel,” former chief secretary Bimal Koirala told the Post. “Another measure could be to increase their retirement age.”

The current total of serving government employees who stand to receive pension upon retirement stands at 597,248. Last year, the government spent over Rs170 billion to pay serving officials and pensioners in total.

Financial strain

Fiscal Year     Pensioners    Expenditure

2010-11     —     Rs6.82b

2011-12    189,560    Rs11.54b

2012-13    196,626    Rs18.29b

2013-14    197,963    Rs22.00b

2014-15    212,007    Rs26.01b

2015-16    226,140    Rs26.92b

2016-17    237,624    Rs37.09b

2017-18    250,089    Rs40.14b

 

Source: Pension Management Office

 

 

Published: 02-09-2018 08:21