India needs strategic reforms to ensure adequate retirement income

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Introducing a minimum access age so it’s clear that benefits are preserved for retirement purposes is probably going to travel a protracted way in improving the sustainability index and therefore the integrity index might be further elevated by refining the regulatory requirements for the private pension system.

This year, India ranked 40th on the 2021 Mercer CFA Global Pension Index ranking out of 43 systems, which indicates India has to undertake strategic reforms to revamp the pension system to confirm adequate retirement income.

The primary objective of this annual survey by Mercer Consulting is to benchmark each retirement income system using over 50 indicators.

According to the survey, India had an overall index value of 43.3 among the countries analyzed. The index highlights key strengths of superannuation systems around three sub-indexes – adequacy, sustainability, and integrity, where India scored 33.5, 41.8, and 61.0 respectively.

The adequacy sub-index represents the adequacy of the advantages that are being provided, the sustainability sub-index represents the likelihood that the present system can provide benefits within the future, while the integrity sub-index includes many legislative requirements that influence the governance and operations of the system which affect the amount of confidence that citizens have in their system.

In its beginning within the Index, Iceland overthrew The Netherlands to receive the best overall index value of 84.2. Thailand had the bottom overall index value at 40.6.

The coverage under the private pension arrangement is just about 6 percent in India. With over 90 percent of the total workforce being in the unorganized sector, measures should be taken to get a larger workforce under pension savings.

Preeti Chandrashekhar, India Business Leader at Mercer – Health and Wealth says, “The Indian pension system is at an inflection point, especially as the longer-term effects of the COVID-19 pandemic have not yet played out fully on the economy.

In India, the report suggests introducing a minimum level of support for the poorest aged individuals and increasing coverage of pension arrangements for the unorganized class for bettering the adequacy index.

Experts say introducing a minimum access age so it’s clear that benefits are preserved for retirement purposes is probably going to travel a protracted way in improving the sustainability index and also the integrity index may be further elevated by refining the regulatory requirements for the private pension system.

The coverage through a pension is low thanks to minimal long-term public pension spending, low investment in NPS because of the absence of co-contribution, a scarcity of education and awareness, and different benefits and withdrawal terms compared to the state-managed pension fund.

” With these concerns in mind, the promise of a secure retirement depends on policymakers and industry stakeholders taking collective action to look at the strengths and weaknesses of pension systems, to deliver better retirement benefits to each individual,” she adds.

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