The Hindu Business Line : Indian cos provide inadequate retirement benefits: Mercer survey

New Delhi, Sept. 19 Indian companies, whether in the public sector or private sector, have inadequate retirement benefits. The benefits are still inadequate to meet a 60 per cent income replacement ratio for the retiring workforce — considered the typical global standard, according to a Mercer survey.

Coupled with the lack of public healthcare support and social security, inadequate corporate retirement programmes in India can potentially have adverse implications for the country’s economic and social stability in the decades to come.

The report, Retirement Practices Survey – India, is based on contributions from 48 of the largest companies in India, with an almost equal representation of public and private sector companies, highlighting a distinct contrast in practices of the two.

Young workforce

In India, this issue may not be as immediate, and, therefore, may not have received the policy attention that it is given in Japan, China, Korea, Europe and the US.

The demographic composition of the workforce in India is younger than many major global economies.

Thus, for many workers, retirement seems distant. “When compared to employees in other large Asian economies such as China, Japan and Korea, the relatively younger workforce in India is yet to develop an adequate awareness of the importance of retirement savings,” said Ms Vanessa Wang, Asia Business Leader, Mercer Retirement & Risk Consulting.

“One of the key observations of this study is that the fixed administrative cost incurred by a privately managed provident fund covering a large number of employees is significantly less than the variable fee paid to the Employees’ Provident Fund Organisation.

“For a large size corporation in India, the savings in management fees from private management of provident fund could be as high as 80 per cent,” said Mr Gautam Kakar, India Business Leader for Mercer’s Retirement and Risk Consulting.

Pension types

Public sector companies studied by Mercer generally provide a traditional defined benefit type of pension, whereas private sector companies provide a defined contribution type of pension.

In defined contribution pension plans, the investment risk and longevity risk are borne by the employee.

The study also showed that a vast majority of the companies analysed, both in the public and the private sector, provide provident fund, gratuity and leave encashment benefits to their employees.

Among the 48 companies studied by Mercer, the prevalence of supplementary superannuation schemes is 68 per cent in the public sector and 77 per cent in the private sector.

More Stories on : Social Security

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Indian cos provide inadequate retirement benefits: Mercer survey

Re depreciation to boost customs revenues: CBEC chief

Public-private model mooted for infrastructure growth

Work on new Koodankulam units to start by year-end

CBEC wants SEZ units to be surveyed for service tax compliance

Salient features of banks’ code for MSEs discussed

At IIM-A, they saw shape of things to come

Kochi emerges potential market for luxury car makers

Flow cytometry centre set up

CII favours easier FDI norms for small units

AP rice millers seek power subsidy

Mr Shibunath T. Appu, Manager, Business Development, Central Depository Services Ltd; Jayabharat School of Management Studies, Vengola

Kharif crops in over 18 lakh hectares affected

Drug haul worth Rs 52 lakh