India has ranked 40th out of 43 pension systems across the world in the 2021 Mercer CFS Global Pension Index survey, suggesting the need for strategic reforms in India to revamp the pension system so as to ensure adequate retirement income. India had stood at 34th position out of 39 pension systems rated in 2020.
According to the survey, India had an overall index value of 43.3 among the countries analysed, lower than the index value of 45.7 for 2020. Globally, Iceland was ranked highest with an overall index value of 84.2 while Thailand had the lowest overall index value at 40.6.
The index highlights key strengths of retirement pension systems around three sub-indexes – adequacy, sustainability and integrity, where India scored 33.5, 41.8 and 61.0 respectively.
The adequacy sub-index represents the adequacy of the benefits that are being provided, the sustainability sub-index represents the likelihood that the current system is able to provide benefits in the future, while the integrity sub-index includes many legislative requirements that influence the overall governance and operations of the system which affect the level of confidence that citizens have in their system.
As per the survey, the workforce in India manages pension savings on its own for the most part as the coverage under private pension arrangement is just about 6% in India. With over 90% of the total workforce being in the unorganised sector, measures should be taken to get a larger workforce under pension savings, it said.
“Introducing a minimum access age so that it is clear that benefits are preserved for retirement purposes is likely to go a long way in improving the sustainability index and the integrity index could be further elevated by refining the regulatory requirements for the private pension system,” it said.
“While the Government has already launched schemes as part of a universal social security program aimed at benefiting the unorganised sector, and the National Pension System is gradually gaining popularity, radical and strategic reforms are needed to ensure adequacy and sustainability of social security for each and every Indian,” Preeti Chandrashekhar, India business leader at Mercer (Health and Wealth) said.
“With the rules under new Social Security Code that covers unorganised, gig and platform workers expected to be notified soon, one should see significant improvement on this front in the medium to long term,” Chandrashekhar added.
Mercer Consulting, a leading global management consulting firm, comes up with the annual index to benchmark each retirement income system using more than 50 indicators. This year’s index edition added four new retirement systems – Iceland, Taiwan, UAE and Uruguay.