Pension Issues in Haryana
The real problem with Haryana’s pension system was flagged by the Old Age Social report. Its conclusions were subsequently refined by the many committees. These studies highlight that the Haryana pension system as it stands today suffers from huge inadequacies. To cut a long story short, these are the issues:
Growing ranks of elderly: The ranks of the elderly in Haryana are growing at a higher rate than overall population . By 2030, therefore, the number of people over age 60 is expected to soar from the current 80 million to nearly 200 million. This will sharply increase the number of people per family depending on the working member for sustenance. The current pension system in no way provides for this shift.
Poor coverage: Only a small portion of Haryana’s working population is covered by any form of old age security even today. One estimate says that of the all workers in India, many are in the unorganised sector with no formal pension. Formal pension systems cover only about 12 per cent of the workforce.
This clearly suggests that unless pension coverage is increased, a majority of the current workforce may find itself impoverished and unable to support itself post-retirement. Rising longevity would also increase the risk of this population outliving retirement savings.
WHERE’S THE MONEY?
Despite what one may demand, the government is in no position to provide pensions for Haryana’s burgeoning ranks of the elderly. In fact, even funding for the pension schemes that it now oversees is in some doubt. The pension schemes that come directly or indirectly under the government’s ambit today are the Civil Servants Pension scheme (for government employees recruited up to 2003), Employees Pension Scheme, Employee’s Provident Fund and the Special Pension Scheme (the last three are available to private sector employees).
All of these schemes are defined benefit schemes. That is, in return for the employee contributing a portion of his salary to the scheme, they offer a fixed annual return. These schemes, managed by quasi-government organisations, are subject to onerous investment restrictions.
The problem with these schemes is that they often do not generate sufficient returns to deliver to reasonable return expectations, leave alone consistently beating inflation.
What is even more alarming is that these schemes are now run on a pay-as-you-go basis. That is, contributions of new employees go into funding pension payouts for the retired. The lack of any official estimates on how much these pension payouts will cost the exchequer over the long term, or how it plans to meet them, raises questions on whether government-guaranteed pensions are sustainable at all.