Tapping low-income groups with hopeful pension products

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Nearly 9 per cent of India’s one billion population set to become aged over the next three years by 2016. Nearly 9 per cent of India’s one billion population set to become aged over the next three years by 2016.
SummaryOld age security, especially for those in unbanked areas, is often considered a paradox.

With pension schemes tailor-made for marginal investors, including tribals such as those living in the Nilgiri hills, one can say that saving for life after 60 has come of age in India

Old age security especially for those in the unorganised sectors and unbanked areas of the country is often considered a paradox for the simple reasons of the ability to generate continuous payments by such workers and the logistics of reaching out to them.

So roti, kapda, makaan and basic amenities like drinking water, health and sanitation, roads and electricity may continue to be the key focus of earlier and existing governments and now political parties in this election season.

But with nearly 9 per cent of India’s one billion population set to become aged over the next three years by 2016, taking it to a further 13.3 per cent or 179 million people becoming senior citizens by 2020 (OASIS Report), the need for retirement savings has become a pressing priority.

“There is a growing stress on the joint family system and there is an immediate need for introduction of formal, contributory pension arrangements that can supplement informal systems. This problem is particularly important in India, which will enter its demographic transition, into increasing number of aged people, at lower income levels than those seen in other countries, which have long introduced systems to cope with the problems of an ageing population,” said the Project OASIS Report in 2000.

To this end, a start was made by the government when it launched the NPS Lite and the Swavalamban scheme in 2009 that targets marginal investors and allows them to open accounts through an aggregator and also has relaxed minimum contribution provisions. So subscribers are free to choose how much they wish to invest. Along with that, the government contributes Rs 1,000 annually in the accounts of eligible subscribers who contribute between Rs 1,000 and Rs 12,000 per year in the scheme.

“Any pension product like the National Pension System faces four main challenges — awareness of the consumer, ability to put in money, the challenge to get back the money securely and regular information over the 20 to 30 year payment period,” points out Gautam Bhardwaj, co-founder and managing director of Invest India Micro Pension Services (IIMPS).

Imagine this: An uneducated woman of the Paniyan tribe in the Nilgiri hills in Tamil Nadu who has no bank account or even a concept of money is now

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