Old age security is a big worry for Indians as income at retirement is far from adequate for most people. Now, a global study done by Mercer Consulting validates this fear as it reveals that the Indian pension system ranks a lowly 40th in a comparative index of 43 systems.

The primary objective of this annual survey by the global management consulting firm is to benchmark each retirement income system using more than 50 indicators.

This year’s index edition added four new retirement systems — Iceland, Taiwan, the UAE and Uruguay. In its maiden appearance in the Index, Iceland overthrew the Netherlands to receive the highest overall index value of 84.2. Thailand had the lowest overall index value at 40.6.

Sub-indices

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-indices — 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 which affect the level of confidence that citizens have in their system.

Unorganised workforce

With little social security coverage in the country, the workforce in India has to manage pension savings on its own for the most part. 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,” the report said

According to Preeti Chandrashekhar, India Business Leader at Mercer – Health and Wealth, “Radical and strategic reforms are needed to ensure adequacy and sustainability of social security for each and every Indian. With the rules under new Social Security Code that covers unorganised, gig and platform workers expected to be notified soon, one should see significant improvement on this front in the medium to long term.”

The report also underlines areas of improvement for the pension system surveyed.

Shamit Chokshi, CFA Society India’s Research & Advocacy Committee member, said, “The promise of a secure retirement depends on policymakers and industry stakeholders taking collective action to examine the strengths and weaknesses of pension systems, with the purpose of delivering better retirement benefits to every individual.”

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