Social security: Extension of retirement coverage to 38 cr workers on the cards
To bridge the disparity between higher life expectancy and the lack of income support in old age, the government plans to launch a mission to provide credible retirement coverage to nearly 38 crore of the non-working workforce. covered so far in the country.
Currently around 12 crore of workers, most of them in the organized sector, receive some sort of retirement benefit 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 retirement funds.
âInterministerial consultations are underway on how to achieve saturation of retirement / retirement coverage. The idea is that everyone should participate in one of the programs, âan official told FE. The budgetary impact of the mission, which may include the granting of incentives to workers and employers, and administrative arrangements, should be assessed, taking into account the availability of funds. The increase in savings resulting from much greater retirement coverage for workers nationwide could also boost investment, officials say, who initiated the talks.
India has an estimated workforce of around 50 crore, ranging in age from 16 to 60 years old.
âOffering tax incentives without people realizing it won’t help. There is a need to launch a serious campaign to wake up those 38 million people they need to save for their retirement, âsaid Gautam Bhardwaj, co-founder of pinBox, a global retirement tech committed to the inclusion of micro-pensions digital technologies in Asia and Africa.
âIf the government does that, you could end up in a situation where you will have $ 500 billion in additional long-term savings over the next 10 years in India. These new economies will also benefit the economy and markets, in addition to stimulating investment in infrastructure and overall economic development.
Preliminary discussions suggest that the government wants mission-mode leadership similar to that of ‘Pradhan Mantri Jan-Dhan Yojana (PMJDY), who extended the bank facility to low-income people, for the universalization of pensions.
PMJDY made financial inclusion a universal phenomenon and played an important role in helping people through direct bank transfers of financial aid to sections of PMJDY account holders during Covid in 2020. Since its Launched in August 2014, 43.7 crore of beneficiaries opened bank accounts. so far a level close to saturation.
The flexibility of premium payments and high health expenditure (OOP) are obstacles to expanding pension coverage, even though the necessary infrastructure is in place through JAM trinity (Jan Dhan bank account, number d ‘Aadhar and mobile identification).
âOffering tax incentives without people realizing it won’t help. There is a need to launch a serious campaign to wake up those 38 million people they need to save for their retirement, âsaid Gautam Bhardwaj, co-founder of pinBox, a global retirement tech committed to the inclusion of micro-pensions digital technologies in Asia and Africa. âIf the government does that, you could end up in a situation where you will have $ 500 billion in additional long-term savings over the next 10 years in India. These new economies will also benefit the economy and markets, in addition to stimulating investment in infrastructure and overall economic development.
Bhardwaj said Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY) should be paired with a pension plan to create a more integrated and meaningful solution, as health care risks pose immediate risks. PMJAY, which provides annual health coverage of Rs 5 lakh / family to people living below the poverty line, should be extended to the entire workforce for a small premium, Bhardwaj said. There is also a need to align savings much more with income by allowing people to save smaller amounts in multiple installments over the course of a month rather than a large lump sum, he added.
The formalization of employment – jobs with essential social coverage – accelerates for a few years until 2020-21. The incentives offered by the government for the inclusion of workers in the EPF scheme have considerably broadened the fund’s subscription base. The process has since slowed down a bit due to the pandemic.
As FE reported recently, new enrollments in the Pradhan Mantri Shram Yogi Maandhan voluntary program which guarantees a monthly pension of Rs 3,000 from age 60 for domestic workers, rickshaw pullers and others in need. low income have fallen rapidly and may soon be reduced to nothing. As such, against the goal of enrolling 10 crore people in five years from FY20, just over 45 lakh of people joined the heavily subsidized pension scheme until October 18 of this year. year.
Atal Pension Yojana (APY) in the NPS is a voluntary government-backed scheme intended to provide old age income security in the form of a minimum insured pension (ranging from Rs 1,000 to Rs 5,000 / month), proportionally to individual contributions, even if it is linked to the market. It forms 68% of the subscriber base under the umbrella of the NPS.
However, the lack of income appears to be forcing an increasing number of workers to leave the scheme prematurely. While a record 79 lakhs of workers, mostly from the unorganized sector, joined the APY in FY21, even as the pandemic wreaked havoc, 10 lakhs left the program during the past year. ‘year. The government may also need to think about some sort of protection against temporary revenue losses, analysts say.
With longevity dropping from 75 to 80 years for average Indians, more people need to be introduced to retirement products through innovative means such as automatic enrollment in schemes such as the NPS upon joining an organization, said to FE the president of the PFRDA, Supratim Bandyopadhyay. recently.