Context:
India’s pension architecture has undergone a gradual transformation to address the ageing population, rising informalisation of labour, and the need for financial inclusion and social security. With over 153 million elderly (60+), projected to rise to 347 million by 2050, pension reforms aim to ensure income security, dignity, and welfare, especially for workers outside the formal sector.
Key Highlights:
Demographic Imperative
- Rapid growth in the elderly population due to increased life expectancy and declining fertility.
- Majority of elderly depend on informal work or family support, with limited pension coverage.
Government Initiatives & Policy Evolution
- Indira Gandhi National Old Age Pension Scheme (IGNOAPS) (1995):
- Non-contributory social assistance for Below Poverty Line (BPL) elderly.
- Focus on minimum income support.
- Old Pension Scheme (OPS):
- Defined benefit scheme for government employees before 2004.
- Fiscal stress led to reforms.
- New Pension Scheme / National Pension System (NPS) (2004):
- Shift to defined contribution, market-linked returns.
- Extended to all citizens on a voluntary basis.
- Atal Pension Yojana (APY) (2015–16):
- Targeted at informal sector workers (18–40 years).
- Guaranteed pension of ₹1,000–₹5,000 per month.
- Flexible contribution cycles (monthly/quarterly/half-yearly).
- Labour Codes (2020):
- Introduced uniform definition of wages.
- Mandated basic pay ≥ 50% of total remuneration, strengthening pension base.
- e-SHRAM Portal:
- National database for unorganised workers.
- Linked with Aadhaar and bank accounts for benefit delivery.
Data, Challenges & Gaps
- 42% of individuals above 55 unaware of NPS (LASI 2017–18).
- 63% elderly lack digital literacy, limiting access to online platforms.
- Aadhaar and bank linkage requirements may exclude the most vulnerable.
- Issues in registration, awareness, and benefit convergence under e-SHRAM.
Relevant Prelims Points:
- Issue & Causes:
- Informal sector dominance, lack of employer-backed pensions, demographic ageing.
- Government Initiatives:
- IGNOAPS, NPS, APY, Labour Codes, e-SHRAM.
- Benefits:
- Financial inclusion, retirement income security, portability of benefits.
- Challenges:
- Digital divide, low awareness, exclusion errors, fiscal sustainability.
- Impact:
- Gradual shift from welfare-based to contributory and investment-linked pensions.
Relevant Mains Points:
- Key Concepts:
- Contributory Pension Schemes, Social Security, Financial Inclusion.
- Institutions & Schemes:
- Pension Fund Regulatory and Development Authority (PFRDA), NPS Trust.
- Static Linkages:
- DPSP – Article 41 (Right to public assistance).
- Way Forward:
- Enhance digital literacy among elderly.
- Offline and assisted registration mechanisms.
- Greater state capacity for outreach and awareness.
- Integrate e-SHRAM with health, insurance, and welfare schemes.
- Balance fiscal prudence with social justice.
UPSC Relevance (GS-wise):
- GS 2: Social Justice – Welfare of elderly, inclusive governance.
- GS 3: Economy – Labour reforms, social security, financial inclusion.
- Prelims: Schemes, demographic trends, pension terminology.