India needs to design new pension system; Only 58 mn covered so far: Report
By TIOL News Service
|
NEW DELHI, MAR 15, 2017: TO achieve the goal of a healthy pensioned society India India needs to carefully design its pension system. As per 2011 Census Data, only about 12% (about 58 mn) of the working population is covered under any pension plan and the pension savings are not at all adequate. These are the findings of the FICCI-KPMG White Paper.
The Report notes that the population projections suggest that the elderly residents (people aged 60 and above) will triple from 2010 to 2050 and the number of elderly will reach 331 million in India by 2050. A combination of aging population, weakening of the joint family support system and low pension penetration makes it imperative for policymakers to pay urgent attention to the enormous challenge of providing income security after retirement.
The aspiration of a pensioned society would need greater emphasis on implementing pension reforms. A lot of effort and planning is needed for building sufficient capacity, scalability and support for implementation of such reforms.
For the white paper, KPMG in India again conducted an Employer Pension Plans Survey this year similar to the survey conducted in the year 2015, to have an overview of the pension plans from company representatives from diverse sectors (industrial markets, IT/BPO, automotive, healthcare, financial services, consumer markets, etc.). In all, 167 business entities responded to the survey.
The survey highlights that a majority of the employers are of the view that more emphasis needs to be given towards employees’ retirement planning. The survey responses indicate that tax benefits are considered as the primary reason to opt for NPS similar to the results of Employer Pension Plans Survey of 2015. A majority of respondents felt that the contribution towards retirement savings should be in the range of 20-30 percent of one’s salary.
Some of the other important findings of the Employer Pension Plan Survey, 2017 are as follows:
++ The system of automatic enrolment of employees under the EPF regime is largely prevalent. Around 84 per cent of the respondent companies mandatorily enroll their employees for EPFO membership, irrespective of the salary level
++ Nearly 55 per cent of the survey respondents confirmed that employees in their organisations are exercising the option of contributing to Voluntary Provident Fund (VPF);
++ Around 82 per cent of the respondent companies are contributing towards PF on full basic salary of the employees while 13 per cent restrict the same on statutory monthly limit of INR 15,000/-
++ Thirty six per cent of the respondent companies have registered for National Pension System (NPS). Further, almost 33 per cent of organisations that currently do not have NPS, are considering to register for NPS;
++ Tax benefits for employees continue to be the primary motivator (52 per cent of the respondents) for employers to opt or consider NPS in this year’s survey as well. A large number of respondents (42 per cent) view employee empowerment for pension planning as one of the motivating factors for opting/considering NPS;
++ Further, almost 57 per cent of the respondents stated that there has been an increase in NPS enrolment due to Finance Act, 2016 announcement regarding tax benefits on withdrawal of NPS contributions;
++ Only 29 per cent of the respondents have set up superannuation fund (SAF) for their employees. Of the 94 respondents, which do not have SAF, only 10 organisations have plans to set up an SAF;
++ A large majority of the respondents (around 92 per cent) agree on the importance of tax savings as an important consideration for voluntary contributions to retirement plans.
|