India’s senior citizens face a looming threat due to inadequate annuity coverage, warns the Reserve Bank of India’s latest Financial Stability Report. With 78% of elderly individuals lacking pension cover, the report underscores the potential systemic risk this presents to the economy.
The report, released on June 28, delves into the factors impacting the financial resilience and stability of India’s pension system. According to data from the NITI Aayog’s position paper, a significant portion of the elderly population is devoid of pension coverage, a concerning statistic as the demographic continues to grow rapidly.
As per United Nations estimates, the elderly population in India is projected to double by 2050, potentially comprising 20% of the total population. By 2046, it is anticipated that there will be more elderly individuals than children aged between zero and 15 years. This demographic shift raises critical questions about access to pension benefits for all seniors.
To address this issue, various pension schemes such as the National Pension System (NPS), Atal Pension Yojna (APY), and others have been instituted by the central and state governments. The RBI report highlights a positive trend in NPS and APY memberships, driven by growing awareness and disposable income among individuals.
The Financial Stability Report notes a 16.3% year-on-year increase in NPS and APY subscribers during the fiscal year 2023-24, with a corresponding 30.5% rise in assets under management. By March 2024, the combined subscriber base for these schemes stood at 7.35 crore, with a total AUM of Rs 11.72 lakh crore.
State government employees constituted the largest segment of subscribers, followed by the all-citizen category. In terms of assets under management, contributions from state government employees led the pack. The report stresses the need for concerted efforts between public and private entities to ensure universal pension coverage in India.
In a bid to enhance operational efficiency and cybersecurity measures, modern technologies like artificial intelligence and the Internet of Things are being leveraged in the pension ecosystem. The Pension Fund Regulatory and Development Authority (PFRDA) emphasizes the importance of collaboration among stakeholders to fortify the system against digital threats.
Regulatory initiatives aligned with global best practices have bolstered customer protection and minimized cybersecurity risks in the pension sector. Moving forward, continued vigilance and cooperation will be essential to safeguard the interests of pension scheme participants and ensure a robust, resilient system.
