India has the weakest retirement system

Mumbai: India’s retirement system continues to rank the lowest amongst the 25 countries, with less than 6 per cent of the working population in the country covered under private pension plans while Denmark tops the list with its well-funded plan, according to a recent report. The country’s score largely remained unchanged at a grade of ‘D’, which is between 35 and 50, indicating that it has some sound features but there are major omissions or weaknesses, according to 2014 Melbourne Mercer Global Pension Index (MMGPI).

The report also pointed out that the D-grade classification may also occur in the relatively early stages of the development of a particular country's retirement income system, like India, China, Indonesia and Korea.The public sector in India has adequate retirement benefits through other additional retirement benefits provided, but they represent only a small fraction of the entire population of India, it explained.

Economic and regulatory changes have put a lot of pressure on the pension mechanism with less than 6 per cent of the working population in India covered under private pension plans (including pension plans for public sector employees and the military), while more than 75 per cent of the working age population in Chile, Denmark, the Netherlands and Sweden are covered under the private pension plans, it said.

The report said there is no pension or support for the poor and aged and what continues to hold India back is the lack of retirement coverage for the informal sector and less than adequate retirement income expected to be generated from contributions made to Employee’s Provident Fund (EPF) and Gratuity benefits.

The Mercer Global Pension Index uses three sub-indices — adequacy, sustainability and integrity — to measure each country’s retirement income system against more than 50 questions.“India scored well in the integrity of their retirement system. However, improving the minimum level of support for the poor, improving the regulations of private pension plans and addressing issues on increasing life expectancy will help raise the score in the future,” Mercer’s India retirement business leader Arvind Usretay said.