Retirement Saving

India has a long history of retirement savings products. Unfortunately, this history is one of allowing continuous fitful additions by different players. In the light of the statement, critically comment on the post-retirement savings products scenario in India. (200 Words)

History of Retirement saving products in India: Introduced by British in 1880s for civil services, later extended to various other public sector services like Railways, Telegraph etc. After Independence benefits extended to private sector as well. However mostly organized sector people are covered under various retirement products.
Current Scenario :
    • Pension for various sector Employees:
      • Government Employees/PSUs/ Government. Banks : For Government sector employees 3 kind of retirement benefits are there.
        1. Gratuity and General Provident Fund: provided as lump sum at retirement
        2. Monthly pension after retirement. Remark: So overall a gud structure is there to take care of govt. employees.
      • Organized sector Pvt. Employees: Recently contributory PF is compulsorily being deducted to provide a lump-sum at retirement time. Monthly Pension is not there. However an employee may voluntarily opt for monthly pension by subscribing to various market products like LIC, NPS etc.
      • Old age pension schemes: welfare policies of govt. like Rashriya Bridhavasta pension yojana
    • Players: Govt. + Pvt. both like EPF, GPF, CMPF, LIC and various insurance companies provides a variety of products.
    1. Low return on pension products : as pension products don’t invest in mutual funds or other risky adventures.
    2. Unorganized sector workers are left out of it.
    3. Poor Investment in pension sector ; a high amount of FDI is needed.
    1. A comprehensive national policy should be there to promote pension sector.
    2. Pension products should be encouraged to take risks so their operations could be viable.
    3. Govt. also may take leading step as it has recently took in JAN DHAN YOJANA by providing insurance cover.
It is argued that a properly crafted universal pension scheme will increase the coverage of pension without putting stress on government finances. Critically examine the need for such a scheme and feasibility of making it universal. (200 Words)
Need for a universal pension scheme
    1. Elderly population is vulnerable section of society. Elder people have health problems related to physical disability, mental unstableness, chronic diseases etc. These health problems have financial implications.
    2. Another problem related to old age is feminization of elderly. Female live longer than their male counterparts. Female have even less financial power and face more vulnerability.
    3. Currently IGNOAPS, NPS-lite and NPS-swawlamban are some of pension schemes. Most of the pension are for organised sector or are voluntary. These all schemes cover barely 30% elderly population.
    4. The demographic profile of India will not last forever and in future, india will have more elderly population
    5. Large number of persons work in unorganised sector without any social security
    6. Indian society is moving towards nucleated-family structure and senior citizens are facing many problems due to lack of any financial help and lack of family care.
    7. The huge requirement of capital to generate infrastructure and productive processes.
    8. Low penetration of Health Insurance Schemes
    9. Inefficient Public Sector Healthcare. Expensive Private Sector Healthcare
    10. Need for financial inclusion
The scheme is highly feasible due to low premium rates and also given the huge population of India will result in increased investment in projects. Gains from these will ensure that there is no strain on fiscal account of govt at the time of payment. Administrative cost will be reduced in case of universal pension scheme. The financial feasibility will be increased by linking the bank accounts and savings with pension schemes. FDI in insurance can also help. Propagating financial literacy is also important to ensure feasibility.



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