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Part - V

The formal old age income security system in India can thus be classified into three categories: -

• The upper tier consists of statutory pension schemes and provident funds for the organized sector employees.

• The middle tier is comprised of voluntary retirement saving schemes for the self-employed and unorganised sector workers.

• The lower tier consists of targeted social assistance schemes and welfare funds for the poor.

Pension Reforms in India

Pension reforms are new in the Indian context. These have been part of the process of financial sector liberalization that has been ushered in. And this in turn is an integral and important part of neo liberal globalization that is sweeping the whole world today. Pension reforms as contemplated, involve setting up a separate Pension Fund Regulatory and Development Authority (PFRDA). Not clubbing the pension authority with the insurance authority (IRDA), a country cousin to the same, is a very clever ploy by the government. The underlying logic was simple; bait to straight away feed the avarice of foreign players to enter the Indian market with 100 per cent equity. While in insurance, Indian private players have been permitted entry along with foreign partners with an equity limited to 26 per cent, separation of pension would enable higher foreign equity - even 100 per cent - in regard to pension funds. This is what foreign financial interests want; they are not satisfied with just 26 per cent equity participation. However in India pension funds, today are in vogue only in certain sectors. Its time the industry takes cognizance of the fact that pension fund is a resource that is immensely useful to individuals in that vulnerable stage in their life and hence should be invested and managed in a scientific way.

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* Contributed by -
Swetha Narayanaswamy,
First Year M.B.A.,
ICFAI Business School, Mumbai.