The government is considering the proposal to include some sectors of the economy into “soft compulsion” pension schemes to widen the social security net in India, PFRDA Chairman Hemant G Contractor said today.
“We have made a suggestion to the government that some sectors of the economy should be included in auto enrolment of pension schemes. The government is looking at that,” Contractor said while speaking at the launch of FICCI-KPMG knowledge paper on pensions in India.
Contractor said there are challenges in the country to expand the pension plans, which is why PFRDA has suggested the government about adopting a soft compulsion method also called auto enrolment in some countries.
Under the soft auto enrolment, employees of an organisation are automatically included into pension schemes unless they opt out of it. The Pension Fund Regulatory and Development Authority (PRFDA) chairman said India right now is well poised to increase its coverage of pension schemes because the economy is doing well and the inflation too has moderated.
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“Inflation problem has been resolved to a very large extent. It has come down to around 5 per cent from 8-9 per cent a few years back. So, with lower inflation, real savings go up. The stage is set, this is the right time and opportunity for people to join pension plans,” he emphasised.
The joint knowledge paper by FICCI-KPMG suggested that people with age of 60 years and above will triple from 2010 to 2050 and the number of elderly will reach 33.1 crore in India by that time.
As a knowledge partner, KPMG in an Employer Pension Plans Survey found that a majority of job givers emphasised on the need for employees’ retirement plans.
Tax benefit is the primary reason to opt for the National Pension System (NPS), as per the survey, adding that employers felt contribution towards retirement savings should be in the range of 20-30 per cent of one’s salary.
“In India, this has been high on the priority list of the government that has taken a series of measures to extend the reach of the social security net. Hope this paper will prove to be a key input in policy discussions in this important area,” A Didar Singh, Secretary General, FICCI, said.
KPMG Partner and Head of Global Mobility Services Parizad Sirwalla said India needs significant efforts for building sufficient institutional capacity for implementing pension reforms.