Voluntary pension scheme for all on cards: Won’t be tied to employment, will be open for all

Synopsis

India is exploring a Universal Pension Scheme that is voluntary and contributory, aimed at offering social security to all individuals. The scheme will incorporate existing central pension programs to streamline processes, extend benefits to unorganized workers, and include traders and self-employed individuals for comprehensive coverage.

New Delhi: India is considering a Universal Pension Scheme that would be voluntary and contributory, aimed at providing social security to all, officials said.

The ministry of labour and employment has started deliberations on the umbrella pension scheme.

"The scheme, which would be voluntary and contributory, will not be tied to employment and hence will be open for everyone to contribute and earn a pension," a senior government official told ET.

The broad contours of the scheme under the Employees' Provident Fund Organisation (EPFO) are being worked on, said the people cited.

Pooling of Cess
Once this exercise is over, the ministry will hold stakeholder consultations to firm up the scheme.

The programme will absorb some existing central schemes to make them attractive and streamline the process while enhancing coverage to all sections of society.

The plan is to extend benefits to unorganised workers, traders and self-employed persons and anyone in the contributory age bracket — 18 and above — seeking to avail pension benefits after 60.

The existing schemes that could be merged under the umbrella scheme include the Pradhan Mantri-Shram Yogi Maandhan Scheme (PM-SYM) and the National Pension Scheme for Traders and Self-Employed (NPS-Traders). Both are voluntary in nature and entitle subscribers to a monthly pension of ₹3,000 after 60 on a contribution that ranges from ₹55 to ₹200, depending on the age at the time of enrolment, and a matching contribution from the government.

The Atal Pension Yojana, currently administered by the Pension Fund Regulatory and Development Authority (PFRDA), could also be brought under the mega scheme.

Besides, the cess collected under the Building and Other Construction Workers (BoCW) Act could be pooled to fund pensions for workers in that industry.

The Centre could also nudge states to include their pension schemes under the umbrella scheme so that the government contribution is evenly distributed between them, the quantum of pension goes up and there is no duplication of beneficiaries.

India’s seniors — 60 and above — are expected to number 227 million by 2036 or 15% of the country’s population and touch 347 million by 2050, or 20% of the total.

The US, Europe, Canada, Russia, China and others offer social insurance systems that include social security or pensions along with health and unemployment cover.

In India, social security is largely down to the provident fund system along with old-age pensions and health insurance offered by the Centre to identified beneficiaries, mostly below the poverty line.