RCSC proposed extension of service period from 20 years to 23 years for civil servants wanting to withdraw pension in one go
The Cabinet on November 8 has approved an extension of the required service period for government employees to qualify for lump-sum pension withdrawals, raising it from 20 years to 23 years.
The finance ministry has been instructed to implement this change immediately and comprehensively review existing pension rules and regulations.
The Royal Civil Service Commission (RCSC) proposed a revision to the pension rules in August this year. The Ministry of Finance (MoF) previously reviewed the proposal. Following extensive deliberations and further clarifications provided by the RCSC in October this year, the Cabinet approved the extension of the service period required for lump-sum pension withdrawal from 20 years to 23 years.
Currently, RCSC is waiting for formal information from MoF (the formal communication process is not completed) based upon which forward actions will be undertaken.
Similarly, the finance ministry is also yet to comment on the developments.
The current pension system allows civil servants for a lump-sum pension after 20 years in service, but should retire in consonance to the civil service rules.
The pension regulatory body, National Pension and Provident Fund (NPPF) currently offers pension and provident fund benefits.
Members who have served at least 10 years and retire at the stipulated age are provided a monthly pension income, whereas, the provident fund is a one-time lump-sum payment including total contributions and accumulated earnings.
At present, employees who exceed 20 years of service are only eligible for the provident fund upon retirement, and they receive the pension as a monthly payment.
However, employees who retire before reaching 20 years of service are entitled to both the pension and the provident fund benefits.
With the extension of the qualifying period from 20 to 23 years, civil servants will now have an additional three years to contribute to their pension fund, potentially leading to a larger accumulation in their retirement accounts. This change may also encourage employees to stay in service for a longer period.
The NPPF has not yet commented on the policy change, as they have not received official communication from the Finance Ministry.
As of September 30, 2023, NPPF had 10,284 pensioners. This included 6,240 civil servants and 4,044 military personnel.
The NPPF is a mandatory retirement savings scheme that provides income security for civil servants, armed forces members, and employees of public corporations and enterprises.
The foundation of formal retirement income security was initiated in 1962 with a gratuity scheme followed by Government Employees Provident Fund (GEPF) in 1976 that covered all civil servants, corporate employees and members of the Armed Forces.
With modernization and rapid socio-economic development, the retirement scheme required further review. Considering the overall welfare of government employees during old age, His Majesty the Fourth Druk Gyalpo issued a Royal Kasho to the MoF and RCSC in 1998 to review the existing retirement benefit schemes. Accordingly, the Government Working Committee (GWC) with technical support from UNDP, Asian Development Bank (ADB) and World Bank, carried out the study that resulted in the separation of GEPF operation from Royal Insurance Corporation of Bhutan Ltd. (RICBL) and the establishment of NPPF.
The NPPF was established as an autonomous agency on March 30, 2000, to manage pension and provident fund schemes of civil servants, employees of state-owned corporations and the Armed Forces. On July 1, 2002, the government formally launched the National Pension and Provident Fund Plan (NPPFP) through an Executive Order to provide income security to members on retirement. The Fund also provides extended benefits for surviving spouse, orphan, disability, dependent parent, and for children less than 18 years of age.
Tashi Namgyal from Thimphu
