Old-age security for all: Pension plans should begin right at birth

A contribution scheme that starts at birth could secure people and also fund long-gestation projects

- G.N. BAJPAI & PRAVEEN TIWARI

Advances in healthcare, nutrition and living standards are driving a dramatic demographic transformation. Amid a scenario of rising life expectancy, a declining birth rate and a rapidly ageing population, old age social and income security (OASIS) assumes utmost importance.

The United Nations Population Fund's India Ageing Report 2023 projects that the number of persons aged 60 years and above would double from 149 million in 2023 to over 347 million (25% of the population) by 2050. The dependency ratio would grow from 16% in 2020 to 34% by 2050.

This has profound social, political and economic implications. The burden on the younger population and the state to support the elderly will increase exponentially. In this setting, pensions emerge as a critical instrument of social protection, ensuring dignity, independence and financial security in old age.

Policy steps over the past two decades have covered significant ground by replacing unfunded defined-benefit pension schemes for government employees with defined-contribution systems; and by setting up the National Pension System (NPS) for citizens at large. However, progress on the latter has been modest, given the size of the population to be covered, low financial literacy and failures to appreciate the importance of pension. Yet, concerns of fiscal sustainability, coverage gaps and benefit adequacy in the context of OASIS cannot be overlooked.