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Pension, a priority

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We are a country in transition. Every fifth Indian will be over the age of 60 by 2050—at present, it’s every 12th Indian. Further, the population of people above 80 is likely to increase from 0.9 per cent to 2.8 per cent by 2050. These statistics lie at the heart of Financial Security for India’s Elderly – The Imperatives, a report by the Pension Fund Regulatory and Development Authority (PFRDA) and CRISIL. Pointing to the “continuously declining intergenerational support within families”, the report underlines the need for a “well-developed, self-sustaining pension system in the country”. Here are some highlights and recommendations of the report:

  • Provident and pension funds form just 14 per cent of savings in India and are fed by the organised section of the society. Increasing the penetration of pension products via voluntary pension schemes is the biggest hurdle.
  • The Government should focus on voluntary pension, targeting the huge unorganised sector. To address the current problems of low coverage, low contributions and persistency, the options include flexible payment and withdrawal options; monetary incentives for the lower income strata; exclusive pension schemes for women; and improved financial literacy and intermediation.
  • In the organised sector, there is a need to improve asset allocation, which is currently skewed towards debt, as opposed to the global trend of investing in equity.
  • To address the section of the workforce that is not covered under any form of retirement products, the Government can consider ‘auto-enrolment’ of people who are part of the employee–employer set-up but are not covered.
  • For silvers below the poverty line, the Government could evaluate a targeted pension scheme.
  • The Government should focus on increasing financial literacy and awareness of pension products by including personal finance and retirement planning in formal education.
  • Ensuring consistency across pension products in terms of accounting valuation, taxation and disclosures would also aid the growth of the Indian pension industry.

“A developed pension sector not only reduces the fiscal burden on the exchequer, it also has a stabilising effect on the economy by promoting long-term savings combined with long-term investments,” says Hemant G Contractor, chairman of PFRDA, in the report. “The pursuit of an affordable, adequate, efficient and sustainable pension system will involve a great deal of inter-ministerial, inter-state, inter-regional and inter-institutional decisions and coordination.” Download the report at

Featured in Harmony — Celebrate Age Magazine
July 2017