Rethinking the monthly allowance scheme to senior citizens

“From each according to his ability, to each according to his needs”

German socialist revolutionary and the author of The Communist Manifesto Karl Marx popularized this political slogan in his 1875 Critique of the Gotha Program. For its inability to incorporate fundamental human psychology and grave consequences for human life and dignity, the world history has already turned its back to this ideology in favour of free market economy, also known as capitalism. In a free market economy, people reap the fruits they have sowed the seed for. Nonetheless, this system has one serious drawback with respect to what we perceive as morally and politically preferable outcome.

Our society always has had members such as left-alone senior citizens, persons with severe disability and poor orphan children. They are highly unlikely to finish the journey of life with dignity without external support and care. Almost all societies today have realized that these citizens are to be protected, supported and cared for.

Popularity of the old age allowance

Different countries have adopted different social security schemes as a safety mechanism for these citizens. Nepal has been slowly evolving its own system such as contribution based pension system and tax-funded old age allowance system for persons beyond certain age. Currently, senior citizens above 70 years are entitled to receive Rs. 2000 (US$ 18) per month. It started with Rs. 500 per month a decade ago (fact check??). The old age allowance is particularly popular in Nepal for two basic reasons.

First, it has a wide ranging political consequences for a party in the government as well as in the opposition. Everyone seems to have an unconditional support for this scheme. Almost every family can expect a senior citizen in their home, currently or in the future. According to National Housing and Population Census 2011, there were 2.1 million people aged above 60 years. Many of them have turned 70 by now and many will do so in coming decades. As population growth rate tumbles and life expectancy rises steadily every year, population in this age group is certainly going to grow bigger and politically decisive. Strong voice for increasing the allowance rate to Rs. 5000 or reducing the age threshold is likely to get stronger whenever election looms near or the government erodes its political legitimacy or an opposition party lacks any solid issues to be raised in the parliament.

Second reason for its popularity is its wide coverage due to its single entry threshold; the threshold of age 70. To qualify for the entitlement, only threshold a citizen has to pass to receive the allowance is the age of 70. This makes this scheme easier to administer compared to other schemes that are either based on abstract criteria such as poverty or multiple criteria such as disability status. People can immediately feel the effect of this scheme in their life as it’s easy to qualify and receive the allowance. With a single threshold for the whole country, this is a blanket scheme.

In this article, an attempt has been made to critically evaluate the morality and the rationality of the old age allowance scheme that is being implemented and/proposed in Nepal.

Rewarding the strongest at the cost of weak

One of the most counter intuitive (morally speaking) result of the provision is that it rewards those who live longer. People living longer are much more likely to be richer and in better financial position. The poor and sick who could not cross their 60s will never be able to enjoy the allowance anyway. This is inherently unfair for the weaker section of the society. This argument is not to undermine the increasing need of medical and other care our senior citizens require as they grow older.

Inherited Values

Taking care of a senior member of own’s family has been traditionally a family responsibility in the Indian subcontinent. The story of a poor boy Shravan Kumar, who accepts unconditional hardship to fulfil the wishes of his visually impaired and senior parents, is one of the most popular stories among Nepalis. Most of the families will never throw away their senior members due to emotional and moral reasons. When state attempts to take full or partial financial responsibility of the senior people, an assumption is being made that families cannot fully take care of their senior members. Seniors are being pushed out from family responsibility and being dragged into the territory of state’s responsibility. Supporting the needy senior citizens by the state is seemingly a novel goal to have. In the meantime, we should not forget to strengthen or at least not weaken the values we have inherited through stories that could act as a natural social security for almost all of the senior citizens. State should focus on supporting those minority who cannot find any safety net in their families and communities. This will reduce the budgetary burden on the government and also preserve the moral strength of our communities.

Nothing is free

When we say that old age allowance is free, we mean it is free for the receivers. Anyone who has taken Econ101 in their undergraduate knows that nothing in this world is free. As a society, the taxpayers (ultimately consumers and households) pay the bill of the old age allowance. Being a resource constrained economy, Nepal should be careful in prioritizing the use of its financial resources. A millionaire senior citizen landlord in Kathmandu might not be the target for resource allocation when the most conservative estimate of the number of children with disability is one hundred thousand and many pregnant women in rural Nepal die due to lack of access to bare minimum health care facilities.

Each receiving a monthly allowance of Rs. 2000 would put a burden of almost 2.5 billion rupees. If the allowance is raised to Rs, 5000, the burden would suddenly skyrocket to 6 billion rupees. Reducing the thresholds would increase the burden exponentially. Since this is not based on the contributions made by senior citizens when they were young and working, tax is the only place to rest the burden of this scheme on.

Population distribution matters

The absurdity of a blanket social security scheme such as old age allowance in Nepal can be demonstrated if we look at the population distribution of senior citizens and their average life expectancy across the districts of Nepal. Example of two districts would suffice. Take Kathmandu and Jumla to compare three basic statistics about senior citizens eligible for the old age allowance. In Kathmandu, 2.55% (more than 44 thousand) of the total population are aged 70 and above while as the number is 1.22% (a little bit more than 1300 in Jumla). This makes Kathmandu receive disproportionately more from common taxpayers across the country. Moreover, most of the seniors in Jumla are likely performing much poorer than seniors in Kathmandu in terms of income, diversity of their sources and access to quality healthcare services.

One of the reasons for smaller proportion of the eligible senior citizens in Jumla is the difference in life expectancy in the two districts. Although the life expectancy of an average Nepali is 69 years, the differences across districts are vast. According to Human Development Report 2014, the life expectancy at birth is almost 70 years for Kathmandu and 63 years for Jumla. That means an average child in Jumla does not even expects to reach the age threshold to get the allowance. What about all those districts whose life expectancy is less than 70.

It cannot be further away than this from the principle of fairness. The age threshold for Jumla has to be much less than the current national threshold. A single threshold does not work when there is significant diversity across the dimensions of gender, geography and rural-urban divide. Women’s life expectancy is higher than that of men implying that men’s threshold has to be lower (going to be massively unpopular). Similarly, urban people are richer and have better access to health care. Can we use any blanket threshold for a whole country, a region or even a district when diversity is the norm? Certainly not. What can be the potential solutions out of this?

Difficult Solutions

Solutions are not going to be easier ones when populist politics runs the world. Every political force wants to win the hearts through high end promises without substantiating them with evidence and reason.

First, the age threshold has to go up for districts with higher life expectancy. But increasing the age threshold is going to be very unpopular irrespective of its rationale and moral justification. Again this would also be a blanket threshold within those districts and can prove to be unfair to poor and sick.  

Second, only those districts whose average life expectancy is less than the average get the scheme. This will also be very unpopular in the districts which will not get this scheme because of their higher life expectancy. However, this is also a blanket approach making it unfair for some in both Kathmandu and Jumla.

Third, a multi-threshold approach can be developed so that the individuals are treated as individuals rather than members of an abstract group. The thresholds could be age, income, family size, asset ownership, access to healthcare and so on. This will be the fairest approach possible, but would be tremendously difficult to administer and monitor. It will also be devoid of political appeal as some of the senior citizens might not be able to prove their eligibility. Of course, tough solutions to difficult problems might not be as popular as we might want them to be.


When our families and communities become weaker or hesitant to defend its senior citizens and children in desperate need, intervention of state mechanism becomes a necessity. State mechanism is clearly unable to ensure adequate justice across such a diverse population. Big governments tend to be populist, corrupt and inefficient. The sense of responsibility of our citizens must come from within our moral universe. This will ensure safety, care and emotional support for most of them. But there are always going to be some unfortunate ones. And they need state support on individual basis. Only the really needy senior citizens should get the tax-paid state support. The eligibility of an individual must be judged individually. This will minimize the budgetary burden significantly and ensure maximal justice to our senior citizens while making our families more responsible towards their senior members.