The Indian pension system ranked 40th on overall index ranking out of 43 systems, and had the lowest rank in the adequacy sub-index, according to a study. The country needs to undertake strategic reforms to revamp the pension system so as to ensure adequate retirement income, according to the 2021 Mercer CFA Global Pension Index survey (MCGPI) released on Tuesday.
In India, the report said introducing a minimum level of support for the poorest aged individuals and increasing coverage of pension arrangements for the unorganised working class for bettering the adequacy index.
Introducing a minimum access age so that it is clear that benefits are preserved for retirement purposes is likely to go a long way in improving the sustainability index and the integrity index could be further elevated by refining the regulatory requirements for the private pension system, it said.
With little social security coverage in the country, the workforce in India has to manage pension savings on its own for the most part, it said.
“The coverage under private pension arrangement is just about 6 per cent in India. With over 90 per cent of the total workforce being in the unorganised sector, measures should be taken to get a larger workforce under pension savings. This would go a long way in improving the adequacy sub index,” it said.
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According to the survey, India had an overall index value of 43.3 among the countries analysed. The index highlights key strengths of retirement pension systems around three sub-indexes – adequacy, sustainability and integrity, where India scored 33.5, 41.8 and 61.0 respectively.
The adequacy sub-index represents the adequacy of the benefits that are being provided, the sustainability sub-index represents the likelihood that the current system is able to provide benefits in the future, while the integrity sub-index includes many legislative requirements that influence the overall governance and operations of the system, it said.
