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Are Our Contributory Pension Schemes Failing the Poor?
The issue of old age income security in India assumes significance in view of the expected rise in the incidence of elderly population in the years to come, problems of poverty and vulnerability among them and their limited coverage by the existing old-age pension schemes. Schemes aiming to promote contributions from the poor unorganised workers for their old age security have been promoted by the government since 2010. By comparing and contrasting the design features of India’s two contributory pension schemes, National Pension System Lite and Atal Pension Yojana, and discussing the strengths and limitations of each of these schemes in addressing the needs of low-income workers with the help of available data and studies, we argue that the design features of these schemes are such that they fail to take the specific characteristics of unorganised worker households into account. We also discuss how the current design of contributory social security schemes can be improved to meet the pension requirements of unorganised workers.
The authors thank Robert Palacios and M R Narayana for their comments on the paper.
Publicly-funded old-age pension schemes have been implemented in India for the elderly poor in the last three decades. Although the issues1 of poor coverage, insufficiency of pension amounts, poor governance in the selection and disbursal of pension amounts have been raised from time to time, the same have been hailed2 as successful in helping the elderly poor. Central government schemes that aim to promote contributions from the poor for their old age security have only been promoted since 2010.3 In this paper, we argue that though the contributory pension schemes for the poor such as National Pension System (NPS) Lite and Atal Pension Yojana (APY) have been formulated with the best of intentions, the design features of these schemes are such that they fail to take the specific income and savings characteristics of unorganised worker households into account.
The paper is presented in five sections. After a brief introduction, the importance of old age income security is discussed in the second section with the help of existing studies. In the third section, we highlight that illiteracy, poverty and vulnerability are key characteristics of unorganised workers in India. In the fourth section, we compare and contrast the design features of India’s two contributory pension schemes, NPS Lite and APY, and discuss their strengths and limitations in addressing the needs of low-income workers with the help of available data and studies. In the final section, we discuss how the current design of contributory social security schemes can be improved to meet the pension requirements of unorganised workers.
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