Stressing on finding more ways to expand investment avenues in the country, EPFO Central Commissioner K K Jalan said India has the potential to increase the size of its pension fund by 10 times to around 20 percent of the GDP. "Luxembourg is a small country where the pension fund size is about 160 percent of the GDP. Australia probably has 40-50 percent of GDP as the size of pension fund.
"In India also we can work it that way, we can make the pension fund to roughly around 20 percent of the GDP. If we really work well, we can make 20 percent of GDP as pension fund. If that happens, we have a lot of money available through the investment in various sectors," Jalan said at a conference on Pension and Social Security Reforms.
He added that the pension fund plays an important part in the economy. Jalan said the pension fund market in India is of around Rs 20 lakh crore and there is a need to deepen the market to invest these funds. The Employees' Provident Fund Organisation (EPFO) Commissioner currently manages pension fund size of around Rs 9 lakh crore.
Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant G Contractor, who was also present in event, said that the Indian pension system has a very inadequate social security set up and needs to be increased. "In India we have a system, but inadequate. We have a social security system in place in terms of which government provides income support to people in their old age of 60 years and above for below poverty line. But it is only available to a very few in the country," Contractor said. He added that the pension of Rs 200 per month to people of age 60 years and above and living below the poverty line is pitiably inadequate and it needs to be increased. He said that currently about 27 million people get pension through various schemes under this facility as a government support.
"While the coverage is not small, 27 million is not a small number but the quantum of assistance is really low and it really needs to be increased and for this government runs a bill of Rs 11,000 crore," he said. He said the pension coverage in India is highly skewed as there are two sectors - informal and formal - and most people falling under the latter category are largely uncovered. Contractor said the formal sector comprising government servants, civil servants, defence are fairly covered under pension schemes but about 85-86 percent of the workforce are in the unorganised sector and they are mostly uncovered.
"Formal sector is fairly well covered but the informal sector which is the major issue and it is the major issue because the informal sector today account for almost 85-86 percent of the workforce of the country. "So out of the total workforce in the country, the informal sector is a huge number and this is very scantily covered by the form of pension support, and this is where the problem of the country lies," he added.
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