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Pension regulators EPFO and PFRDA will have to play large roles in providing pension avenues to the working Indian population, a FICCI-KPMG knowledge paper has concluded.
“Given the massive pension coverage gap, both these regulators, in tandem with the government and other stakeholders, need to continue improving the design to enhance pension penetration in India,” said the knowledge paper released by PFRDA Chairman Hemant Contractor at an event in the capital on Wednesday.
The Employer Pension Plan Survey — conducted by KPMG for this knowledge paper — showed that tax savings remain the biggest motivator for enrolling into retirement schemes.
Employers will be required to engage more proactively with their employees for enabling them to take effective and timely pension planning, the paper said.
There is need for enhanced retirement planning and the industry is willing to make contributions for the same. However, unless mandated, subscription to pension schemes remain low vis-a-vis the junior level employees.
“Though, tax incentives remain one of the most important factors in increasing the enrolment to pension plans, they are not able to motivate the junior level employees who may not have tax liabilities,” the knowledge paper added.
The government has made significant changes to the current pension regime to simplify the processes and to attract employees in the lower income brackets. However, substantial results of the changes are yet to be seen, the paper said.
Auto enrolmentMeanwhile, speaking at the event, Contractor said PFRDA had made a suggestion to the government that some sectors of the economy should be included in auto enrolment of pension schemes. “The government is looking into this,” he said.
Given the challenges in the country to expand pension plans, PFRDA has suggested the adoption of a soft compulsion method — referred to as auto enrolment in some countries — to widen the social security net, said Contractor.
Under the “soft compulsion” pension schemes, employees of an organisation are automatically included into pension schemes unless they opt out of it.
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