The National Council has urged the government to enact a dedicated Pension and Provident Fund Act to strengthen governance, accountability, operational independence, and establish a clear legal and regulatory framework for the National Pension and Provident Fund (NPPF), which currently manages more than Nu 73 billion in pension assets.
The recommendation was presented yesterday during the discussion of the review report on the National Pension and Provident Fund Plan by the Good Governance Committee (GGC) in the House.
According to the committee, the NPPF currently operates under the National Pension and Provident Fund Rules and Regulations 2002 and amendments introduced in 2013, without a standalone Act passed by Parliament. The committee stated that the absence of a comprehensive legal framework has resulted in legal ambiguity and governance challenges for the pension institution.
The committee noted that the Executive Order issued in 2002 vested powers of the NPPF in the National Pension Board appointed by the government. However, despite these powers, the institution continues to have limited autonomy, as major decisions involving personnel, finances, and reforms still require approval from the Ministry of Finance.
“The functioning of a Nu 73 billion institution through executive orders, rules and regulations without proper legal backing poses risks to pension fund management, governance autonomy, pension adequacy, retirees’ security, membership coverage, and inclusivity,” the committee stated.
The report also highlighted that international best practices require pension and provident fund institutions to operate as independent legal entities supported by clear legislation and regulatory oversight.
Chairperson of the Good Governance Committee, Kencho Tshering, said the absence of a dedicated Act has contributed to governance lapses and limited pension coverage in Bhutan.
The committee observed that the existing structure restricts the professionalism and operational independence of the institution.
During the deliberations, National Council members expressed concern over the adequacy of pension benefits and the long-term sustainability of the pension system.
According to the committee, the current pension structure is insufficient to cope with the rising cost of living because pensions are calculated based on basic pay instead of gross salary. Following the 2023 pay revision, basic pay now accounts for only around 47 to 54 percent of gross salary, leading to comparatively lower pension payouts.
The committee warned that some pensioners could face old-age poverty if urgent reforms are not introduced.
To address the issue, the committee recommended revisiting key pension parameters, including the replacement rate, pensionable service period, and employee contribution rates under the provident fund scheme.
The report also revealed that pension coverage in Bhutan remains low. As of March 2026, only 93,111 people were enrolled under pension and provident fund schemes, representing just 11.8 percent of the country’s total population.
Several members recommended that pension amounts be revised whenever government salaries are increased through pay commission revisions, despite existing annual increments.
Some members also proposed that children of deceased pension members continue receiving pension support until the completion of their education. Others suggested revising the eligibility age for spouses to receive pension benefits.
The House further discussed extending provident fund coverage to contract employees and encouraging greater participation from the private sector, noting that only around 20 percent of private sector employees are currently covered under the provident fund scheme.
Members additionally proposed providing soft loans to pensioners to support their livelihoods after retirement.
Responding to the discussions, Chairperson of the National Council Sangay Dorji clarified that universal provident fund coverage may not be practical, as provident fund contributions are deducted from monthly salaries and depend on an individual’s capacity to contribute.
The House accepted recommendations related to revising pension amounts, linking pension revisions with salary increases, and extending provident fund eligibility to contract employees. These recommendations were referred back to the Good Governance Committee for further review and consultation.
Chairperson Kencho Tshering said that a dedicated Pension and Provident Fund Act would provide adequate legal provisions to address existing gaps and accommodate future reforms.
The review report and final recommendations are expected to be formally adopted by the House on June 15, 2026.