Originally posted in The Business Standard on 11 August 2023
Universal Pension Scheme: Rushed or timely?
This ambitious plan raises questions about its viability and the strategies the government will employ to ensure its success. The Business Standard has spoken to experts to gain deeper insights into this matter
The government is poised to introduce the Universal Pension Scheme (UPS) on August 17, with the goal of creating a sustainable social security network for senior citizens in the private, informal, and expatriate sectors, as well as for those facing financial hardship. Under this scheme, participants are promised benefits that are 12 times the sum of their contributions over a span of 42 years.
This ambitious plan raises questions about its viability and the strategies the government will employ to ensure its success. The Business Standard has spoken to experts to gain deeper insights into this matter.
‘A lot of homework is yet to be done’
Debapriya Bhattacharya
Distinguished Fellow, Centre for Policy Dialogue (CPD)
The decision by the government to launch the universal pension scheme is a good one. This is a joint success of the government as well as civil society, as concerned analysts have been advocating for it. It is only befitting to have a Universal Pension Scheme (UPS) for citizens of a middle-income country.
However, the current announcement comes at a time when the government is approaching the national election. Thus, the government appears to be premature in launching this scheme, given that many fundamental provisions have not yet been sorted out, and the institutional coordination mechanism is not in place. It seems like a rushed decision within the government—more driven by the electoral agenda and less by the genuine financial needs of the citizens at this moment.
Even if it is launched today, it remains unclear how individuals will enroll in the scheme and how the coordination mechanism will function among the four or five involved institutions. The collection process and the location of the collected funds, along with the applicable interest rate, have not been clarified. Furthermore, it’s uncertain if the rate of return from these funds will be sufficient to provide the promised benefits to the senior citizens.
Moreover, the coverage of the four specific groups mentioned is also a bit tricky due to the lack of clear definitions in this case.
To see real benefits coming out of this scheme, we will have to wait for a considerable amount of time. At this moment, the government is more focused on delivering political rhetoric in terms of delivering their electoral promises.
A lot of homework is yet to be done. The launch date has been pushed forward due to electoral compulsions. Even in the last budget, specific allocations for this purpose were not made. Consequently, there is currently no available funding for this scheme. For example, the organisation responsible for managing this activity has not been specified yet. The allocation of human resources for this scheme is pending, and their salaries are yet to be determined. Thus, it seems to be nothing more than a declaration.