The government is considering to bring a universal pension scheme for all Indian citizens and provide them with social security in old age. According to media reports, the Labour and Employment Ministry has started the discussion regarding the scheme. A proposal is being developed. Officials are exploring the creation of an umbrella pension scheme that would include all Indians, whether they work in organised or unorganised sectors, are self-employed or gig workers, or retail traders.
For some time, the government has been looking into extending social security benefits to gig and platform workers, who are not currently covered under any government-run programmes. This new scheme is expected to include them and many others who presently lack any form of social security.
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What Is The New Scheme Called?
The new universal pension scheme is termed the ‘New Pension Scheme’ for now, as per the NDTV report.
What Is The Objective Of The Scheme?
The peace of mind a guaranteed income in old age can offer cannot be compared to a high but volatile return instrument. A guaranteed pension can offer the needed financial security and mental peace, and thus, is one of the most sought-after feature individuals commonly seek.
The objective of this new scheme is to develop a comprehensive social security programme for all, especially the unorganised sector workers, self-employed individuals, or any person within the age group of 18 to 60 years to secure pension benefits in old age. The aim is also to integrate existing central government schemes under one comprehensive plan.
Ultimately the objective is to simplify the procedures and bring more people under social security coverage.
Existing Government-Run Contributory Pension Schemes:
At present, organised sector workers are covered under the Employees’ Provident Fund Organisation (EPFO), and National Pension System (NPS), Employees' State Insurance Corporation schemes (ESIC).
Unorganised sector workers can voluntarily contribute under the NPS, Atal Pension Yojana (APY), and Pradhan Mantri Shram Yogi Man-dhan Yojana (PM-SYM). For small-scale traders and shopkeepers, there is the National Pension Scheme, and for farmers, there is the Pradhan Mantri Kisan Mandhan Yojana (PM-KMY).
All these schemes are contributory. In the case of organised sector workers, it is mandatory to contribute, but for the unorganised sector, it remains voluntary.
The pension is fixed at Rs 3,000 per month under the PM-SYM, the National Pension Scheme, and PM-KMY after the individual turns 60 years of age. As per the government portal, the government contributes an equal amount as the subscriber in these schemes.
In APY, the pension amount can vary between Rs 1,000 and Rs 5,000, depending on the pension option selected by the subscriber. In NPS, the pension amount is not fixed or predetermined. It depends on the investment plan chosen and the market performance. In EPF, it is a certain percentage of the salary.
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Key Points To Note:
Reportedly, the new scheme would be voluntary and contributory, with no contribution from the government.
It may not be a new scheme altogether, but an integration of existing social security schemes under one umbrella.
Because of the voluntary nature of the scheme, it would not automatically benefit the potential beneficiaries. They will need to be aware of the benefits of savings for their old age and be responsible enough to save under the scheme.
Further it should not be confused with the Unified Pension Scheme (UPS) which is guaranteed pension scheme for the central government employees, or with the existing National Pension System (NPS) for salaried or self employed, or the National Pension Scheme for the small scale traders.
As the proposal document is under development, the exact nature of the scheme is yet to be known. Once it is ready, it will be open for stakeholder consultation.
