No-frills pension plan for low-wage workers

NEW DELHI: The government is mulling a pension scheme that will cover over 28 crore low-income workers such as rickshaw pullers, fishermen, weavers and street hawkers, as it looks to ensure that those who operate on the fringes of the economy get a safety net to lean on when they enter the twilight years of their working life.

The Pension Fund Regulatory Development Authority (PFRDA) is working on a low-cost pension scheme for such low-income workers, which will be ready in about four months, chairman D Swarup told ET.

The regulator is now designing the scheme in such a way that the cost of keeping the records of beneficiaries would be much lower than the Rs 350 a year that the National Securities Depositories (NSDL) charges for maintaining accounts of the recently expanded New Pension System (NPS).

While NPS employs banks to keep accounts for its beneficiaries, the new scheme will shift that task to co-operative societies.

However, while lauding the intention behind the scheme, pension experts said the real challenge would be in bringing in the targeted populace under the pension umbrella.

Motivating low-income workers to join the scheme and providing a decent retirement income from their very small savings after decades of inflation are major challenges, said Gautam Bhardwaj, co-founder of Invest India Micro Pension Services that launched the first pension product for low-income workers in India. State governments like Rajasthan make co-contribution to the beneficiaries in the ���Micro Pension��� scheme.

���For a worker earning daily wages, the immediate priority would be to feed his or her children rather than saving for retirement. Convincing low income workers to defer consumption for thirty years and make them continue to save year-after-year may be a tough task,��� said Mr Bhardwaj.

It is also tough is to balance the incentives for the poor to join the scheme with the commercial incentives of the entities delivering the scheme, he said.

PFRDA plans to launch a national campaign to make low income workers aware of the need for retirement saving. The regulator now has a fund of Rs 10 crore for this and expects more from the government.

According to the authority, the ultimate pension wealth from the scheme would depend on the investment option chosen by the subscriber, the amount of contribution and market returns.