As per article 33, 34 and 43 of the Constitution of Nepal, Government has made provision to provide social security of citizens of country. By considering the provisions of constitution of Nepal, Government of Nepal has introduced contribution-based-ssf-law-2074, rule 2075 and social-security-scheme-operating-procedure-2075-second-amendment (hereinafter called SSF scheme) for the social security of private sector employees which is impliedly in replacement of existing senior citizenship allowance to the employee from private sector. In addition to that, Government of Nepal has introduced Contributory Pension Fund Act, 2075 to provide social securities for the Government level employees.
As per preamble of both the above Acts, it is proposed for the social security based on contribution of individual contributor either from private or government sectors. It is contributory in nature that means level of social security is based on amount of contribution in security fund during service time.
However, there is disparity in private and government sector employees although both are tax payers and providing equal level of contribution in terms of job performance and monetary value. Disparity in these two sectors of contributors are illustrated as below.
Comparison of Bank interest income and SSF pension
In the above calculation sheet, assuming average salary of contributors from both sectors is Rs. 35,000.00 and assuming service period of 30 years. In the private and government sector, contributors contribute Rs. 2,520,000.00 and Rs. 1,512,000.00 respectively during service period of 30 years in pension fund. If the contributor does not want to go on SSF and deposited the same amount in any BFIs, per month Interest income shall be Rs. 17,850.00 and Rs. 10,710.00 respectively considering average interest rate of 8.5% p.a. and principal amount shall be refunded at any time to the contributor or nominated family members after life time.
And, if not deposited in Bank, respective contributors can be used in any or all social purpose like construction/ purchase of house, purchase of plot of land/ vehicle, higher education of children, repayment of loan, medical treatment, business startup, entrepreneurship creation for next generation, marriage of son/ daughter, enjoy in retirement life etc.
If a contributor wants to go under SSF scheme, per month pension income of both sectors is Rs. 15,750.00 and Rs. 21,000.00 respectively. Here in this situation, the principal amount of Rs. 2,520,000.00 and Rs. 1,512,000.00 respectively will be collapsed and pension amount is lower than interest income. Private sector contributor will lose interest income by 2,362.26 whereas the Government contributor will gain by Rs. 10,640.00 which has great meaning for individual contributor in remaining retired life.
Disparity in Pension amount between Private and Government sector
Here in the above case, private sector contributors contribute Rs. 1,008,000.00 more than that Government sector contributors in pension fund but pension income lowered by Rs. 13,002.26 for private sector contributors although both contributors are tax payers to the nation. There is additional Tax liability of 21% on gratuity amount for private sector. Private sector employees who are earning high salary package will be in great loss in this scheme.
Government has provisioned certain medical and accidental facilities to the private sector employees but as these facilities are provided during service period only which is as peanut type, Insurance is more beneficial to cover all these risks.
For the private sector contributors, pension income even does not cover interest in Bank deposits at minimal interest rate whereas principal amount will be collapsed. And this amount of pension is not sufficient for even basic needs of human beings like flooding, clothing and sheltering after retirement. At this stage of time, life is for survival only and to be compromised on all needs and wants which could not be covered during service time although contributors have paid the highest tax rate amount.
Legal disparity in SSF income
As per article 18 (4) of constitution of Nepal, no discrimination shall be made on the ground of gender with regard to remuneration and social security for the same work. But there is disparity in private and government sector employees although both are taxpayers and provide equal level of contribution in terms of job performance and monetary value from the above calculation.
In addition to that, as per section 15(2), 17(2) and 24(Ga) of the provisions of social-security-scheme-operating-procedure-2075-second-amendment, in case of death of Contributor during service time or after taking 180 months pension, respective husband/ wife or Father/ Mother who has alternative job/pension Income shall not be allowed to take neither principal amount of life time earnings and savings of 28.33% as a PF+ gratuity of Contributor nor pension from that amount.
Opinion on SSF
As per the Fundamental Rights in Article 17(1), 18 (4), 25(1), 28, 34(2) and 38(6) of the Constitution of Nepal, every Individual has equal rights and any tax paid earnings (PF/CIT+ Gratuity etc.) deposited in any retirement funds account is his/ her private Movable property on which Individual has privacy and cannot be taken over by Government in normal course of action as well as should have Individual’s right/ freedom to deal with either to take back in lump sum or as a pension after retirement.
Conclusion and way forward on SSF
In conclusion, as per provision of section 3 of the Contribution-based-SSF-law-2074, only those Individuals who have made contribution under SSF can get benefit therefrom. So, it should be the choice of Individual to make a secure future based on his/ her contribution during service time and contribution in SSF should be made voluntary to make Nepal prosperous in terms of Social Security in compliance with the Fundamental Rights of the Constitution of Nepal.
Happy to see prosperous and socially secured Nepal!
Writer is a Social Campaigner.