The Indian Government has launched a pension scheme for workers in the unorganized sector who do not have access to India’s social security net.
Under the scheme, named ‘Swavalamban’, India’s central government will contribute INR 1,000 (USD 23) per year to each new pension account opened in the year 2010/11 and for the following three years. The Scheme is available to all citizens in the unorganized sector who join the New Pension Scheme (NPS) subject to eligibility criteria. To be eligible, a person will have to make a minimum contribution of INR 1000 (USD 23) and maximum contribution of INR 12000 (USD 270) per year.
The Indian government is asking microfinance institutions to encourage members to join the scheme and make contributions. Mr Rani Nayer, executive director of the Pension Fund Regulatory and Development Authority, said, “Unless these people have some form of income they cannot save for a pension. If microfinancial companies can offer microcredit, this will provide a disposable income for these workers which they can use for a pension…. Only 15 percent of Indian people are covered in some form of pension scheme, covering mostly those from organized or government sectors. We are trying to reach small investors and create a culture of saving for pension which is not there. To reach these people and convince them is a big challenge.”
By Witt Gatchell, Research Associate
Sources and Additional Information:
[1] Global Pensions: “Indian fund turns to micro-finance for first deposits” http://www.globalpensions.com/global-pensions/news/1740838/indian-fund
[2] The Times of India: “Pension scheme for unorganised sector” http://timesofindia.indiatimes.com/business/india-business/Pension-schem…
[3] Government of India Press Release: “Operational Guidelines for the Swavalamban Scheme”
http://www.pfrda.org.in/writereaddata/linkimages/Press%20Release%2017th%…
MICROCAPITAL BRIEF: Pension Fund Regulatory and Development Authority (PFRDA) Launches NPS-Lite, Program of The National Pension System, to Reach Economically Disadvantaged in India
https://www.microcapital.org/microcapital-brief-pension-fund-regulatory-a…
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