On the road leading to Numaish Chowrangi in Karachi, a small office with the dark green logo of National Savings Centre (NSC) can be spotted from afar. It is the first week of the month and the NSC office is crowded with people — mostly old, feeble and some barely able to walk. They are all waiting their turn to receive the monthly income on their savings.

As I try to weave my way to the front office to have a word with the manager, an elderly lady with a walking stick looks at me with reproach, suspecting that I am trying to jump the queue. An old man mumbles as he leaves the counter still counting currency notes in his wrinkled hand. A clerk buries his face in the ledger as he tells the next lady in line the amount she will receive on her Behbood Saving Certificates (BSC). The information is met by an outburst of anger and the jeers at the manager, Aftab Durrani. However, Durrani seems unfazed. He tells me he’s used to being loathed after working at the NSC for so many years.

And as such there is good reason for senior citizens to be angry: formally a refuge for pensioners, senior citizens and widows, NSC is no longer offering enough returns to them to meet their expenses. The manager admits that things have taken a turn for the worse after former finance minister Shaukat Aziz (1999-2004) decided to tap the cheapest source of borrowings for the government through Treasury Bills and Pakistan Investment Bonds.

Pensioners have been the most affected by cuts to returns on National Saving schemes

Aziz slashed the returns on National Savings Schemes (NSS) without a thought for the voiceless pensioners and widows. Aziz started slashing the rates, which have since been revised downwards every six months or at the government’s whim.

Durrani also points that although the profit payment date is the first of every month, many elderly people arrive a day or two earlier and only to be sent back home.

THE CASE OF THE FOREVER SHRINKING SAVINGS

As he patiently waits for his turn, a gentleman sits on a crowded bench and tells me how he saw his income being ‘vanished’. He owns BSCs which were initially launched for widows, and later included senior citizens above the age of 60. “The BSCs were supposed to offer the highest returns. Eight years ago — till June 2009 — the certificates provided 1,342 rupees on an investment of 100,000 rupees,” he complains. “That return has gradually evaporated by 42 percent. Now you get just 780 rupees on the same investment amount.”

The Monthly Income Certificate, an alternative to BSCs, was once a reliable source of monthly income as well. While only widows and retirees can invest up to five million rupees in Behbood, Monthly Income Certificates are open for all to invest in.

Like the BSC, the profit on the Monthly Income Certificates too has reduced: from 1,133 rupees per month eight years ago to 545 rupees currently. Such a meagre amount is scarcely enough to pay the grocery bill, let alone other expenses including medical bills which can be very high for senior citizens. Even commercial banks, another option, offer a similar rate to the current government certificates on long-term savings accounts and certificates.

This decrease in monthly profits has hit senior citizens and widows (who have lost their breadwinners) particularly hard. With no social security safety net, the situation is critical for this segment of society —at least for those who haven’t worked in the government.

The gap in pension plans of government employees and private sector workers is an eye-opener. A Grade-17 government officer who retires after 22 years of service is entitled to receive 45,000 rupees each month in pension, while a bank officer who may have toiled for an equal number of years is handed out a monthly pension of just about 1,200 rupees.

Most medium and big private corporations contribute a part of the employee’s monthly pay to government-run Employees Old Age Benefit Institution (EOBI) all through the employee’s working years. In the twilight years of his life the employee is returned 5,000 rupees in monthly pension.

Such a small amount is surely insufficient and people who have managed to save during their working years try to augment earnings through investment. But after financial responsibilities such as children’s education, weddings, daughters’ dowries, most senior citizens are left with precious little savings.

DON’T PUT ALL YOUR EGGS IN ONE BASKET

For investors who could afford to keep money for a longer term, the certificates were an investment of choice and the drastic drop from 18.04 percent to 7.54 percent doesn’t affect them much. They’ve simply turned to other forms of investment such as stocks and bonds.

With no social security safety net, the situation is critical for senior citizens and retirees — at least for those who haven’t worked in the government... A grade 17 government officer, who retires after 22 years of service, is entitled to receive 45,000 rupees each month in pension, while a bank officer who may have toiled for an equal number of years is handed out a monthly pension of just about 1,200 rupees.

Pensioners have been tempted to follow in the footsteps of professional investors and some have paid for it dearly. Many are financially naпve and fall prey to fraudsters who lure them by offering to double the money in no time, through clandestine Ponzi schemes and soon vanish leaving the poor pensioner penniless.

So if banks offer too little and NSC returns are waning, what other options do the senior citizens and pensioners have? “The rule of thumb is not to put all the eggs in one basket,” says financier Salman Lakhani.

Many retirees have followed such advice and have spread their savings: they park their money in a banks’ savings account or buy saving certificates for a paltry (more or less) seven percent return. They invest the rest in other options with little success: gold isn’t increasing in value; savings in US dollars no longer offer a healthy return due to the stability of the currency; and opting for prize bonds is literally like investing in lottery tickets.

The stock market is also a very tempting place to invest: it offers the highest return among all types of investments. Last year, the Pakistan Stock Exchange (PSE) gave a 46 percent return on equity investment — the highest by any regional market in Asia. The underlying companies also pay dividends (part of the profit) to its shareholders. But with high rewards come high risks. Stocks can be volatile. And a pensioner with a small amount in the till exposes himself or herself to a lot of risk with such investments.

What other options are there? Some people such as Amna Begum have been able to survive on a pension through wise investments and good luck.

Fifteen years ago, Amna received 300,000 rupees from an insurance claim when her husband passed away. Making a wise move, she sold her gold jewellery. With the money she earned from selling her jewellery, her husband’s savings and the insurance, she had enough money to buy a two-room flat in Karachi’s Kharadar area which she gave on rent. She lives quite comfortably with her two daughters from the monthly rent income as the rent of flats has risen with inflation.

Others with no sources or little luck have opted to go back to work — if they are deemed fit and ‘useful’ enough by their companies. Saeed Sumrani, a ‘retired’ accountant agreed to work for 50 percent of his previous salary without any of the previously available benefits such as medical cover, bonuses, provident fund and gratuity.

“Do I have a choice?” he asks and explains that he receives 7,000 rupees in pension, has precious little savings and three mouths to feed. He also has to look after a sick wife and pay for his son’s college fees. “I must work until my son is able to support the family or till I die,” he reflects with sadness.

Published in Dawn, EOS, July 2nd, 2017