Social security: Extension of pension coverage for 38 cr workers on the cards
Social security: Extension of pension coverage for 38 cr workers on the cards

Social security: Extension of pension coverage for 38 cr workers on the cards

Currently enjoying about 12 million. workers, the majority in the organized sector, a form of pension benefit

To bridge the gap between higher life expectancy and lack of income support in old age, the government is considering launching a mission to provide credible pension coverage to the nearly 38 crore hitherto uncovered workforce in the country.

Currently enjoying about 12 million. workers, the majority of whom are in the organized sector, a form of pension under one of the following schemes: Employment Provident Fund (EPF), National Pension System (NPS), PM Shrarm Yogi Maandhan, Pradhan Mantri Kisan Maan-Dhan Yojana, Coal Mines Providend Fund, Assam Tea Plantation Provident Fund, Seamen Provident Fund and various other pension funds.

“There are inter-ministerial consultations on how to arrive at pension / pension coverage saturation. The idea is that everyone should be part of one of the schemes, says an official to FE. The budgetary implications of the mission, which may include providing incentives for workers and employers and administrative structures, must be assessed taking into account the resources available. The promise of savings as a result of a much larger pension coverage for workers in the country can also encourage investment, according to the officials who started the discussions.

India has an estimated workforce of around 50 crore aged 16 to 60 years.

“Giving tax incentives without people being aware of the incentives does not help. There is a need to start a serious campaign to wake up those 38 million people who need to save up for retirement,” Gautam Bhardwaj said. co-founder of pinBox, a global pensionTech committed to digital micro-pension inclusion in Asia and Africa.

“If the government does that, then you could end up in a situation where you have $ 500 billion in additional long-term savings over the next 10 years in India. These new savings will also benefit the economy and markets, in addition to increasing infrastructure investment and overall economic development. . “

Preliminary discussions suggest the government is eager for a missionary operation similar to ‘Pradhan Mantri Jan-Dhan Yojana (PMJDY), which expanded the banking facility for low-income people, to universalize pensions.

PMJDY has made financial inclusion a universal phenomenon and played a major role in helping people through direct bank transfer of financial aids to parts of PMJDY account holders under Covid in 2020. Since its launch in August 2014, 43.7 crore recipients have opened bank accounts until further an almost saturation level.

Flexibility in premium payments and large out-of-pocket (OOP) healthcare services act as stumbling blocks to expand the coverage of pension schemes, even though the necessary infrastructure is in place using JAM trinity (Jan Dhan bank account, Aadhar identification number and mobile).

“Giving tax incentives without people being aware of the incentives does not help. There is a need to start a serious campaign to wake up those 38 million people who need to save up for retirement,” Gautam Bhardwaj said. co-founder of pinBox, a global pensionTech committed to digital micro-pension inclusion in Asia and Africa. “If the government does, then you could end up in a situation where you have $ 500 billion in additional long-term savings over the next 10 years in India . These new savings will also benefit the economy and markets, in addition to increasing infrastructure investment and overall economic development. “

Bhardwaj said that Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY) should have a pension scheme to create a more integrated and meaningful solution as health risks pose immediate risks. PMJAY, which provides an annual health coverage of Rs 5 lakh / family to people below the poverty line, should be extended to cover the entire working population for a small premium, Bhardwaj said. There is also a need to reconcile savings much more in line with income by allowing people to save smaller amounts in multiple installments in a month instead of a large lump sum, he added.

The formalization of employment – jobs with significant social security – accelerated for a few years until 2020-21. The incentives offered by the government to include workers under the EPF scheme have significantly expanded the fund’s subscription base. The process has since slowed down a bit due to the pandemic.

As reported by FE recently, fresh enrollments under the voluntary Pradhan Mantri Shram Yogi Maandhan scheme, which guarantees a monthly pension of Rs 3,000 from the age of 60 for domestic workers, rickshaw pullers and other low-wage earners, have fallen sharply and may soon be down to zilch. As such, against the target of enrolling 10 million people in five years from FY20, just over 45 lakh people have joined the heavily subsidized pension scheme until 18 October this year

Atal Pension Yojana (APY) in NPS is a state-subsidized, voluntary scheme intended to provide old-age income security in the form of a minimum-insured pension (ranging from 1,000-5,000 Rs / month) in relation to individual contributions, even though it is market-linked. It makes up 68% of the subscriber base under the fold of the NPS.

Lack of income, however, seems to be forcing an increasing number of workers to leave the scheme prematurely. While record-breaking 79 lakh workers, mostly from the disorganized sector, joined the APY in FY21, even as the pandemic wreaked havoc, 10 lakhs moved out of the scheme during the year. The government may also need to think about some form of protection against temporary loss of income, analysts reckon.

With a life expectancy rising to 75-80 years for average Indians, more people need to be initiated into pension products using innovative ways, such as automatic enrollment in schemes such as NPS at the time of joining an organization, said PFRDA chairman Supratim Bandyopadhyay for FE recently.

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