Only 5 million unpaid individuals have been enrolled in the last 12 years under the National Pension System (NPS), a new study found that retirement savings for unorganized sector workers should be approved in flexible installments rather than in phases. It also called for the removal of entry barriers, such as the mandatory email ID for enrolling in NPS, to make NPS more attractive to low-income earners.
The survey found that 87% of people in urban areas have an active e-mail ID, while only 48% of people in rural areas have an email ID.
Although email connections in rural areas are about half that of cities, about 2 out of 3 in rural areas are connected via WhatsApp, according to a Sambodhi Research and Pinbox Solution Pan-India survey aimed at profiling latent pension demand among informal sector workers. The frequency of WhatsApp use in metropolitan cities is about the same as in off-metro cities with a population of about 0.1 to 1 million.
“To make NPS more attractive and affordable, there is a need to align much more savings with income by allowing people to save small amounts in multiple installments over a month or quarter. Some barriers, such as a mandatory email ID, can also be removed to make NPS publicly available. Customers should be able to use an OTP on their mobiles for secure transactions that require verification, ”said Gautam Bharadwaj, co-founder of Pinbox, a global pension tech firm committed to digital micro-pension integration in Asia and Africa.
In 2009, the government introduced NPS schemes for voluntary retirement savings for 400 million informal sector workers in India, but so far only 1% of them have been registered, partly due to design flaws mentioned above. The NPS corpus of about Rs 7.5 trillion is mostly from the organized sector workers, especially from government employees for whom the scheme is mandatory.
In urban areas, most people are paid on a monthly basis, while in rural areas, it is divided into daily wages, seasonal income from agriculture, and monthly payments. Similarly, on the savings front, most urban dwellers save monthly while rural dwellers save whenever they can.
Although most earners in urban and rural areas believe that retirement savings should start in the mid or late twenties, this is not a complete reflection of their actions. In reality, less than 80% of urban dwellers and 60% of rural dwellers are currently saving for their old age.
“People over the age of 35 still hold on to the idea that their children will take care of them in their old age, a feeling that is shared by a much lower proportion than younger ones. The real problem is that only 30% of the rural poor, about 65 million families, believe that by the time they retire, they can save enough to support themselves in their old age, “said Sandeep Ghosh, Tim Sisa, Sambodhi Panel.
Across most income groups, the priority is to save 6-10% of income; The lowest income group prefers less than 5%, while the higher earners prefer 6-10%.
The sample size of the survey was about 12,000, of which 8,000 respondents were from urban areas and 4,000 from rural areas.