Retirement benefits decrease, declines to Nu 993M in FY 2023/2024

Retirement benefits decrease, declines to Nu 993M in FY 2023/2024

The retirement benefits provided by the Royal Government to civil servants have significantly reduced from Nu 1.7 billion (B) in the Fiscal Year (FY) 2022/2023 to Nu 993 million (M) in FY 2023/2024, marking a 41% decrease. This accounts for only 2.3% of the total budget for FY 2023/2024.

According to the central bank’s Annual Report 2024, this reduction is directly linked to a lower attrition rate within the civil service, indicating fewer civil servants retired or resigned during the year. While the retirement benefit expenditure decreased, contributions to the Provident and Pension Fund rose to Nu 1.5B, up from Nu 1.4B in FY 2022/2023.

The Royal Civil Service Commission (RCSC) reported a notable decline in the civil service attrition rate during the first quarter of 2024 (January to March), compared to the same period in 2023. A total of 524 civil servants separated from service in the first three months of 2024, compared to 1,869 during the same period in 2023—a decline of 1,345 individuals.

The RCSC emphasized that achieving the ambitious goals of the 13th Five-Year Plan (FYP) and realizing Bhutan’s aspiration to become a developed country by 2034 requires adopting a multi-pronged approach. This includes setting higher targets, implementing game-changing strategies, enhancing accountability mechanisms, fostering innovation, introducing performance-based incentives, and strengthening Public-Private Partnerships (PPPs), among other initiatives.

As of January 2025, the National Pension and Provident Fund (NPPF) has a membership of 65,241 and 10,304 pensioners, with a fund size of approximately Nu 65.06B.

An NPPF official highlighted that retirement planning often takes a backseat in Bhutan, stating, “Retirement may seem like a distant milestone, and for many, it’s not a priority in the present.”

The official noted that changing societal structures due to modernization and urbanization are reducing reliance on traditional family support systems, necessitating greater awareness about retirement benefits. The official encouraged Bhutanese people to start planning by educating themselves, exploring savings plans, and breaking taboos by discussing retirement openly with family, friends, and colleagues.

The official said that one reason could be modernization and urbanization, where traditional family structures are evolving. With children expected to care for elders, relying solely on family support is no longer sufficient, highlighting the need for retirement benefits.

The official added that Bhutanese people can begin changing their mindset by educating themselves, exploring additional savings plans, and breaking the taboo by discussing retirement planning openly with family, friends, colleagues, and others.

Meanwhile, the current expenditure for FY 2023/2024 totaled Nu 43.4B, representing a 22.6% increase compared to the previous fiscal year. This rise was mainly attributed to the implementation of the Pay Structure Reform Act of Bhutan 2022.

Among the key components of current expenditure, pay and allowances accounted for the largest share at 56.9%, followed by interest payments at 11.8%t. Other key components of current expenditures include supplies and materials (6.3%), grants (4.3%), retirement benefits (2.3%) and Provident and Pension Fund (3.5%) which together accounted for 16.4 percent of total current expenditure in the FY 2023/2024.

The Act aims to enhance the effectiveness and efficiency of public services by adopting a clean wage system, alongside covering operating expenses and hospitality and entertainment costs, which took effect in July 2023.

In terms of capital expenditure, total capital spending for FY 2023/2024 decreased to Nu 26.7B, a 20.7% reduction from Nu 33.7B in FY 2022/2023. This drop in capital expenditure was primarily due to the conclusion of the 12th Five-Year Plan (FYP) and the transition to the 13th FYP.

Similarly, the majority of capital expenditure for FY 2023/2024 was allocated to infrastructure, including roads and buildings, amounting to Nu 14.3B, which accounted for 53.7% of the total capital expenditure.

Other capital expenditures included plant and equipment (10.2%), training (7.8%), professional services (6.2%), capital grants or equity shares (6.2%), and disaster-related costs (0.2%). Together, these six categories comprised 84.3% of the total capital expenditure for the fiscal year.

Meanwhile, the approved national budget for FY 2023/2024 was Nu 74.8B, while the total actual expenditure reached Nu 70.2B, constituting 26.3% of GDP. Of the total government expenditure, 61.8% was allocated to current expenditure, while the remaining 38.2% was directed toward capital expenditure.

Sherab Dorji  from Thimphu