Bhutan is the only country in South Asia without a formal non-contributory social pension, leaving a gap in its old-age income protection system as its population ages, according to a new World Bank report.
The report, Demographic Change in South Asia, says Bhutan relies on contributory pension and provident fund arrangements, while support for people facing hardship is provided through Kidu, a traditional institution through which His Majesty The King extends assistance to citizens in need.
However, the report points out that Kidu is not part of Bhutan’s formal social protection architecture and is not systematically recorded in national social protection expenditure data. This makes it difficult to quantify the support provided through the institution or compare it with formal social protection programmes in other countries.
A non-contributory social pension is a government-funded payment made to older people regardless of their contribution history. Unlike contributory pensions, eligibility is not based on an individual’s employment history or accumulated pension contributions.
The absence of such a scheme raises questions about how people who have spent much of their working lives in informal employment, self-employment or unpaid family work will secure an income when they can no longer work.
Bhutan has several contributory pension and provident fund arrangements, including schemes administered by the National Pension and Provident Fund (NPPF), as well as provident fund arrangements through the Royal Insurance Corporation of Bhutan Limited and Bhutan Insurance Limited.
The Bhutan Private Provident Fund, introduced in 2007, operates on a defined-contribution basis, with a contribution rate of 10 percent. The scheme provides a lump-sum payment at retirement, based on accumulated contributions and investment returns, with the retirement age set at 57, according to the report.
While these arrangements provide retirement savings for covered workers, they depend on participation and contributions during a person’s working life. People who spend years outside formal employment or have interrupted work histories may not accumulate enough contributions to provide adequate income in old age.
The challenge is not unique to Bhutan. Across South Asia, pension coverage remains limited, particularly among people working outside formal employment.
The World Bank report estimates that only 10 percent of older adults in South Asia receive pension benefits. It also says only 17 percent of the region’s working-age population is covered by a contributory pension scheme.
These are regional figures and do not represent Bhutan’s individual pension coverage.
The report notes that older people across the region often rely on a combination of continued employment, financial support from family members, personal savings and assets, government transfers and contributory pension benefits to meet their needs.
In Bhutan, the continued participation of older people in the labour force also points to the importance of work as a source of income in later life.
According to the report’s 2025 data, 71 percent of people aged 55 to 64 in Bhutan were participating in the labour force. The participation rate was 38 percent among those aged 65 and above.
While some older people may choose to continue working, reliance on employment can become difficult as age-related health conditions and physical limitations affect their ability to earn an income.
The report also highlights broader demographic changes that will increase pressure on countries in South Asia to strengthen their systems for supporting older populations.
Across the region, the working-age population is projected to reach its peak in 2034, while the share of people aged 65 and above is expected to reach 14 percent by 2049, marking the region’s transition to an aged population.
The report warns that demographic change will require countries to prepare for the economic and social implications of an ageing population, including ensuring that older people can maintain financial security.
Health-related costs could add to the pressure. Non-communicable diseases account for nearly two-thirds of the disease burden across South Asia, while high out-of-pocket health spending can reduce household savings and make it harder for older people to meet their living expenses.
For Bhutan, the findings bring attention to the limits of relying primarily on contributory arrangements when a section of the population may not have had regular access to formal employment or pension coverage throughout their working lives.
The report does not quantify how many older Bhutanese people lack pension benefits or how many depend on family support and other forms of assistance. However, it identifies the absence of a formal non-contributory social pension as a gap in the country’s existing arrangements for old-age income security
Nidup Lhamo, Thimphu
