Pension mkt to swell at Rs 4 lakh cr by 2025
The pension market size is expected to swell to a whopping Rs 4,06,400 crore by 2025 from Rs 56,100 crore in 2002 post reforms in the sector, a Ficci-KPMG report said on Sunday.
By PTI |
NEW DELHI: The pension market size is expected to swell to a whopping Rs 4,06,400 crore by 2025 from Rs 56,100 crore in 2002 post reforms in the sector, a Ficci-KPMG report said on Sunday.
"It is estimated that without any pension reforms, the pension market would grow from Rs 56,100 crore (year 2002) to Rs 1,80,800 crore (Year 2025) and post-reform, the market size is expected to more than double to be around Rs 4,06,400 crore in Year 2025," the Ficci-KPMG study on 'Pension Reforms Background and Key Imperatives' stated.
Only 10 per cent labour force is covered currently through government sponsored or mandated schemes, the paper noted, highlighting the lacunae in the present system of pension.
Income generated through existing programmes is inadequate for many retirees, and often does not provide for protection against the risks of longevity and inflation and the large and fast-growing informal sector is not covered under any formal pension schemes, it said.
The paper stated that reforms in the pension sector will inflate the capital markets which will require advanced techniques for managing the extra inflow of funds.
These would include leveraging technology to provide information to individual pensioners on their asset allocation which will create an interest for individuals and also create accountability on the part of fund managers.
There are few investment avenues for pension funds India, so provision should be there for investing a part of the pension funds in the international markets
A sustainable pension system would require a strong regulatory framework for the legal, financial and administrative matters.
The paper noted that a strong and stable pension system has some very positive impact on the capital markets like development of alternative investment avenues, better financial regulation, better consumer protection, pension fund regulation, market stability and modernisation of trading and record keeping systems and increased role in corporate governance.
There is an interim pension regulator, PFRDA, but the final bill which would give legal sanctity to the regulator is pending in Parliament. From January 1, 2004, the Government had introduced defined contributory system for its employees against defined benefit system of earlier years.
Recently, 19 states have agreed to give option to their employees for putting 5 per cent of the pension fund in equity market.
However, if the move is opposed by West Bengal, Tripura and Kerala, all left-ruled states.
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