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Context:
India’s rapidly ageing population poses a growing pension challenge. Over 153 million Indians are aged 60+, projected to rise to 347 million by 2050. Despite formal sector provisions, 88% of senior citizens work in the informal economy, lacking pensions or reliable social security. The government has progressively revised pension schemes to enhance financial inclusion, social protection, and long-term savings behaviour.
Key Pension Schemes and Evolution
a) Social Assistance Schemes
- Indira Gandhi National Old Age Pension Scheme (IGNOAPS), 1995:
- Targets BPL individuals aged 65+.
- Provides direct, regular income for older adults in the informal sector.
- Old Pension Scheme (OPS):
- Covered formal sector government employees.
b) Contributory Pension Schemes
- Atal Pension Yojana (APY), 2015:
- Contributory scheme for individuals aged 18-40.
- Flexible monthly, quarterly, or half-yearly contributions to accommodate informal sector income variability.
- Government guarantees minimum pension if returns are insufficient.
- New Pension Scheme (NPS), 2004:
- Replaced OPS for formal sector employees.
- Corporate sector model extends coverage to private employees.
- NPS 2.0: Allows 100% equity allocation and a flexible multiple scheme framework (MSF) for younger, high-risk investors.
Policy Reforms and Labour Codes
- Labour Codes redefine ‘wages’ to ensure basic pay ≥50% of total earnings.
- Pension, gratuity, and social security benefits are now calculated on a higher wage base, strengthening financial protection for workers.
Bridging Informal Sector Gaps
- Informal sector coverage: APY and e-SHRAM portal integrate informal workers into the social protection system.
- e-SHRAM: National database for workers; facilitates registration and awareness of eligible schemes.
- Challenges: Aadhaar-bank account linkage, digital literacy, and registration errors.
- Awareness gap: LASI data (2017-18) shows 42% of individuals aged 55+ unaware of NPS eligibility.
Challenges
- Digital literacy barriers: 63% of elderly unable to use the Internet.
- Fragmented access: Procedural requirements risk excluding the most vulnerable.
- Awareness and disbursement gaps: Limit full potential of social security schemes.