Finance minister announces the implementation of a hybrid pension scheme with a dual benefit
A hybrid pension scheme that combines contribution from employees and the Union government will be put in place by June 2002. This is what the High Level Expert Group, set up by the Centre to develop a new pension scheme, had recommended earlier. The pension scheme, primarily for new recruits entering government service, goes a long way in committing to the employees a defined benefit as pension
The Insurance Regulatory and Development Authority (IRDA) had also recommended a regulatory framework for setting up pension funds to enable individuals to subscribe on a defined contribution basis to obtain the benefit of pensions on their retirement.
The present pension scheme for Government employees casts an open-ended financial burden on the Government. The existing pension provisions in India only apply to government staff and employees of big firms. Hence, a majority of the individuals have no pension system. The existing Employees Pension Scheme (EPS) programme of government servants involves huge liabilities for the government which lacks the fiscal strength to deal with these.
The pension business in developed markets is a huge 30% of the total business of asset management companies. While in India, pension sector is still the domain of the government. To add to this, the average life expectancy of an individual has moved up to 80 years.
Hence, there was an urgent need for strengthening the formal channels of retirement savings and putting in place a vibrant pension system in India. The last three years have seen several efforts being taken by the government to usher in reforms in the pension system.
However, liberalisation of the pension sector calls for enabling private sector
