Pen­sion scheme trial to­day: Feb 15 launch likely

Hindustan Times (Lucknow) - - Htnation - Zia Haq [email protected]

NEW DELHI: Prime Min­is­ter Naren­dra Modi will likely launch the gov­ern­ment’s new pen­sion scheme for un­or­gan­ised sec­tor work­ers on Fe­bru­ary 15 and a trial run of the soft­ware of the new scheme is slated for Mon­day, a top gov­ern­ment of­fi­cial said on con­di­tion of anonymity.

The scheme will be ad­min­is­tered by the Life In­sur­ance Cor­po­ra­tion of In­dia, the of­fi­cial said, ad­ding that he and other of­fi­cials are await­ing a con­fir­ma­tion of the launch date from the Prime Min­is­ter’s Of­fice.

The new scheme prom­ises marginally higher ben­e­fits com­pared to its pre­de­ces­sor, the Atal Pen­sion Yo­jana, but that may not re­sult in the in­for­mal sec­tor work­ers mak­ing a dash for it in sub­stan­tially higher num­bers, an­a­lysts say.

The Atal Pen­sion Yo­jana, launched in June 2015, had a tar­get of 20 mil­lion sub­scribers by the end of 2015. By mid-2018, it had 11 mil­lion sub­scribers, ac­cord­ing to of­fi­cial data.

In­dia’s so-called in­for­mal sec­tor em­ploys about 420 mil­lion peo­ple, ac­cord­ing to Cen­sus 2011, and ac­counts for half of the coun­try’s gross do­mes­tic prod­uct (GDP).

Un­or­gan­ised sec­tor jobs don’t come with any form of so­cial se­cu­rity, such as re­tire­ment ben­e­fits. The much smaller for­mal econ­omy em­ploys only 50 mil­lion.

The Prad­han Mantri Shram Yogi Maand­han (PMSYM) an­nounced in the in­terim bud­get prom­ises un­or­gan­ised sec­tor work­ers earn­ing up to ~15,000 a month a monthly pen­sion of ~3,000 af­ter they at­tain the age of 60. Work­ers be­tween the ages of 18 and 40 years qual­ify for the scheme.

In his speech, fi­nance min­is­ter Piyush Goyal said the scheme will cater to 100 mil­lion peo­ple.

On the face, this works out to be a bet­ter deal com­pared to the older scheme be­cause a worker will now have to shell out less for ex­actly sim­i­lar pay­outs, or ben­e­fits.

A worker who joins the new scheme at the age of 18 will have to con­trib­ute ~55 a month and a match­ing amount will be con­trib­uted by the gov­ern­ment. Those above 29 years will have to con­trib­ute ~100 ev­ery month (to make up for late en­try, which re­duces the to­tal life­time con­tri­bu­tion).

As an il­lus­tra­tive case, econ­o­mist Amitabh Kundu says that ear­lier for a ~1,000 monthly pen­sion, a worker en­ter­ing the scheme at the age of 18 had to con­trib­ute ~42 ev­ery month.

So, for a ~3,000 pen­sion a month (which is what the new scheme of­fers), a worker would have had to de­posit ~126 (~42 a month mul­ti­plied by 3).

But an­a­lysts say some of the “dis­in­cen­tives” for poor work­ers in the erst­while scheme still show up in the new scheme.

“Yes, the gov­ern­ment is giv- ing some­thing for sure. I am not crit­i­cis­ing the gov­ern­ment on that count at all. But what is the in­ter­est rate be­ing of­fered? Will it be an in­cen­tive enough?” asked Kundu, who has de­vised many wel­fare schemes. Kundu has been a mem­ber of the Na­tional Sta­tis­ti­cal Com­mis­sion, eval­u­ated mi­nor­ity wel­fare poli­cies, headed a panel on af­ford­able hous­ing, and was most re­cently tasked with eval­u­at­ing Swachh Bharat Ab­hiyaan (ru­ral), the clean­li­ness­cum-san­i­ta­tion pro­gramme launched by Modi in 2014.

In the ear­lier scheme, the in­ter­est rate — or rate of re­turn — was about 7.5%. In the new scheme, the rate of re­turn will be de­ter­mined by the In­sur­ance Reg­u­la­tory Devel­op­ment Author­ity, the of­fi­cial cited in the first in­stance said.

“So, the crux is that for the for­mal sec­tor, if the in­ter­est rate on prov­i­dent fund is about 8.55%, at least give that much in the case of in­for­mal work­ers too to make the scheme at­trac­tive,” Kundu said.

“Even the thresh­old of ~15,000 [em­ploy­ees earn­ing more don’t qual­ify for the new scheme] is prob­lem­atic to me,” said KR Shyam Sun­dar of XLRI, Jamshed­pur. Those earn­ing ~15,000 fall in the lower mid­dle-class. But those earn­ing much less, say ~3000 a month, will not be keen on part­ing with any­thing from their mea­gre in­comes. Their share of con­tri­bu­tion should be waived off to ex­pand en­rol­ment, Sun­dar said.

Like in the old scheme, any­one older than 40 is in­el­i­gi­ble for the new scheme. The share of the work­force above 40 years is over 30% as per the 2011 Cen­sus. Ex­trap­o­lat­ing this, 30% of 420 mil­lion in­for­mal work­force comes to 126 mil­lion peo­ple.

A se­cond gov­ern­ment of­fi­cial said that when seen in con­junc­tion with other wel­fare pro­gram­mers, the Na­tional Demo­cratic Al­liance (NDA) gov­ern­ment has come up with a com­pre­hen­sive safety net for the poor.

He ex­plained that the poor could also count on the Ayush­man Bharat for health pro­tec­tion, PM Jee­van Jyothi Bima Yo­jana, a com­pletely free life in­sur­ance scheme, and also PM Su­rak­sha Yo­jana for ac­ci­den­tal death. “So, this is com­plete pack­age of so­cial se­cu­rity for the poor.”

THE ATAL PEN­SION YO­JANA, LAUNCHED IN JUNE 2015, HAD A TAR­GET OF 20 MIL­LION SUB­SCRIBERS BY THE END OF 2015. BY MID-2018, IT HAD 11 MIL­LION SUB­SCRIBERS, AC­CORD­ING TO OF­FI­CIAL DATA

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