Not the right bill

The social justice and empowerment ministry is expected to introduce in the Winter Session of Parliament a bill to protect and care for the elderly. One of the proposals in the bill is to provide pensions to all the elderly. In a situation where the government is already crushed under the burden of the civil service pension, this is asking for disaster. Countries all over the world are trying to figure out how to get out of the mess of a defined benefit system, and here we are proposing to start one. The other equally absurd proposal in the bill is to convert the moral duty of children to look after their parents into a legal obligation.

The problem is huge but the solution does not lie in the proposed bill. On the one hand, easy withdrawal rules have left even those who have access to old age security, such as the EPF, with little savings. On the other, most of India’s working population has no old age security. In the next few decades, the number of elderly is going to be much larger than it is today (at 88 million). The Indian Retirement Earnings and Savings survey showed that only 10 per cent Indians save for old age. Another 10 per cent are covered through mandatory pension and provident fund schemes. So 80 per cent do not have adequate savings for their old age. There is clearly a complete failure to cater to the needs of old age security of the first generation of Indians born in independent India who are near retirement. However, those currently working will be worse : 94 per cent of existing earners do not save or build assets for retirement, even though they are expected to live an average of another 25 years after this.

In the face of this enormous problem, the first thing the UPA government needs to do is to pass the Pension Fund Regulatory and Development Authority bill in order to allow a system to be created for educating and empowering the large number of elderly that India will have.