Khanal-led commission recommends changes to retirement age, social security allowances

KATHMANDU, April 11: The High-Level Economic Reforms Advisory Commission has recommended the government to raise the mandatory retirement age for civil servants along with the eligibility age for senior citizens to receive social security allowances.

The commission headed by former Finance Secretary Rameshwar Khanal recommended increasing the retirement age from 58 to 60 and raising the age for social security allowance eligibility from 68 to 70. It also proposed levying a 1.5 percent tax on social security allowances. In its report submitted to the government on Friday, the commission recommended that the government refrain from increasing any form of social allowance for the next five years.

"The government should not raise social security allowances for five years and should adjust them only once every two years thereafter, based on inflation," the report stated. "The government should impose a 1.5 percent social security tax on all salary and wage payments and deposit the amount into the Social Security Fund. It should also make arrangements to include informal sector workers in contribution-based social security programs."

The commission has recommended that the government refrain from announcing any new types of allowances in the budget, except for those covered by the Social Security Act, 2075 BS (2018).

The report also suggests linking all forms of social security to the national identity card to create an integrated database of social security beneficiaries. The commission has advised maintaining a unified database of social security benefits provided by provincial and local governments, ensuring no duplication in the distribution of social security, and assigning the Ministry of Labor, Employment, and Social Security the responsibility for collecting and managing all such data.

The commission has advised the government to manage total social security expenditure to keep it below 4 percent of the Gross Domestic Product (GDP) and 15 percent of the federal government's total budget over the next five years. The report also recommends expanding child allowances, currently provided in only 25 districts, to all districts to benefit poor families.

Additionally, the report suggests encouraging social security businesses and organizations to promote contribution-based social security systems, addressing the accumulated liabilities of health insurance, and tackling the increasing burden of health insurance by imposing health taxes on tobacco, cigarettes, and alcohol to fund the insurance pool.

The report recommends revising the current system in medical education, where government colleges provide full scholarships to 75 percent of students, and implementing a new system where 25 percent receive full scholarships and another 25 percent receive partial scholarships.

The report also advises investing financial resources from the Employees' Provident Fund, Citizen Investment Fund, and Social Security Fund into high-return projects.