Posted in Legislative Research on Aug 14, 2020
This bill was posted on the Pyidaungsu Hluttaw website on 06.07.2020 and described in state-run newspapers Myanmar Alin and The Mirror on 7th, 8th and 9th of July, requesting input from the public.
Current Status (14.08.2020) – Has been sent to the Amyotha Hluttaw following the approval of the Pyithu Hluttaw, with changes.
Currently, Myanmar’s pension system for civil servants is a ‘Defined Benefit System’, in which the government bears the cost. This kind of pension system can increasingly become a burden for the country due to rising numbers of retirees and an increase in life expectancy. Statistics show that the cost of monthly pension payments and reward expenses in 2018-2019 FY was 1116.084 billion Kyat, an amount equal to nearly 4% of government expenditure, 1.05% of GDP and one-sixth of taxation. (The graph shows the data on retirement and expenses for the previous fiscal years.)
This system will be changed to a ‘Defined Contribution System’, in which pension payments are linked to actual value of contributions made by the beneficiaries. It has been announced that the transition to the new system will be done in parallel with parametric reforms to the existing system.
The establishment of central provident fund (CPF) is a central component of the reform of pension system. The reform is loosely linked to Myanmar Sustainable Development Plan objectives for civil service reform, public finance management and social protection. Pension reform also appears in the government’s project bank valued at $6million. (Note that in spite of the new bill, the project does not appear to have progressed beyond concept stage according to the project bank.)
The bill has been drafted by the Committee for the Implementation of Central Provident Fund formed under Presidential Notification No. 27/2019 on 19.02.2019. The committee is chaired by Deputy Minister for Planning and Finance, with the Director-General of the Pension Department as Secretary, and in total has 14 members.
The CPF will affect all new personnel and those with fewer than 10 years of service, counted at the date the law comes into force. Civil service personnel with more than 10 years of service will be able to continue receiving benefits from the old system.
The changes under the bill are planned begin in the coming fiscal year, and in the Budget Bill for the 2020-2021 FY, 100 billion kyat has been put for the implementation of the CPF.
(2) Bill Summary
The bill includes provisions for the establishment of CPF governance and management, with the formation of a board to oversee the establishment, maintenance and use of the fund, the duties and rights of CPF members, auditing and reporting, and transitional issues.
- The objectives of the bill are:
- to change from ‘Defined Benefit System’ to ‘Defined Contribution System’
- to increase the value of the fund through investments
- to develop the pension system of the private sector
- To form the Board of the CPF, the Ministry of Planning, Finance and Industry (MoPFI) will submit a lists of representatives of government, civil servants, and citizen experts in finance, economics, social, politics and investment, and “who are also honest”, to the Union Government.
- The board of directors will be composed of between 7 and 11 member submitted by the MoPFI. The persons delegated by the government will be the chair, with the Director General of Pension Department as the secretary and others as members. Government representatives will number between 2 and 3, personnel representatives from 2 to 3, and experts from 1 to 3. The chair of the board is at the level of deputy minister.
- The MoPFI will determine the portion of contribution from government budgets, and the personnel, with the consent of the Government and can change this, when necessary. If the director board requests a contribution from the Union Budget, such as due to unexpected circumstances, the MoPFI will examine and submit to Government.
- The MoPFI will determine sanctions for those who fail to contribute to the fund.
- The director board will invest to raise the fund, supervise investments, determine the contribution rate with the approval of the MoPFI, allow the establishment of equivalent funds in the private sector, and set the procedures to supervise the fund.
- The bill also includes the duties of the secretariat who will help the director board, as well as setting out the offences and penalties, and other miscellaneous matters.
Moe Aung, The Ananda, email@example.com