Rajasthan's pension scheme for unorganised sector draws praise
If the early indicators from a new micro pension scheme in Rajasthan are anything to go by, the state may well set a new trend in providing an old-age nest egg to its low-income unorganised sector workers.
The scheme — Rajasthan Vishwakarma Unorganised Sector Workers (Motivational) Contributory Pension Scheme 2007 — started off in mid-August.
According to the latest numbers, an estimated 17,000 workers have enrolled in the six districts of Jaipur, Ajmer, Bikaner, Udaipur, Dausa and Dhaulpur. The state government is aiming to cover at least half a million workers by 2010.
The pension scheme has been jointly implemented by the state government and Invest India Micro Pension Services Ltd (IIMPS), a group company of the Invest India Economic Foundation (IIEF), as the consultant and turn key implementation agency.
“The scheme is a fair, simple, affordable and sustainable mechanism of saving for old age. Eligible workers between 18 and 60 years can contribute an amount as low as Rs 100 at a time to save in the scheme,” said Kavim Bhatnagar, a civil servant, who is currently on deputation to the IIEF and is implementing the scheme.
“The government is also paying an interest of 8 per cent on the total contributions in the retirement account. In future, it may also decide to invest the funds of the scheme with a regulated fund manager or the pension fund regulated by the Pension Fund Regulatory and Development Authority,” he added.
Rajasthan is the first state to have implemented such a scheme and its fortunes are expected to influence other states into following suit. India has 120 million low-income workers, most of whom have virtually no retirement savings.
IIMPS has estimated that the aggregate annual savings capacity of this population will exceed Rs 11,000 crore, and says as many as 80 million of these workers are capable of saving for retirement. Barely 5 per cent of them are doing so and less than 8 per cent are insured.
Open to bonafide resident workers of the state, the Rajasthan scheme covers as many as 20 occupations.
| OCCUPATIONS COVERED BY THE SCHEME |
| * Rickshaw-puller |
| * Cobbler |
| * Blacksmith |
| * Barber |
| * Domestic help |
| * Street vendor |
| * Motor mechanic |
| * Construction worker |
| * Taxi driver |
| * Beedi worker |
| * Laundry worker |
| * Tailor |
| * Carpenter |
| * Electrician |
| * Shop worker |
| * Stone carver |
| * Pottery worker |
| * Cart-puller |
| * Porter |
| * Sanitary worker |
As long as the worker is not a member of any other pension or provident fund scheme, he or she is encouraged to open individual retirement accounts, to be maintained under a central server by IIMPS as record keeping agency, and save small sums on a regular basis.
On reaching the age of 60 years, the member will receive a pension based on the sum total of member contributions, government contributions and interest generated.
The retirement account has a unique identification number which is used for contributions and account keeping and is portable across the state. The Rajasthan government has committed to add a matching contribution to the member’s saving, subject to a maximum contribution of Rs 1,000 a year per worker.
If a low-income worker opens an account early in life and starts contributing Rs 1,000 at age 20 for the next 40 years till retirement, his total contribution would be Rs 40,000.
Assuming that Rajasthan also contributes an equal amount and that it grows at a compounding rate of 8 per cent, the value of corpus at age 60 would be nearly Rs 5.5 lakh. The worker would receive a lump sum as well as regular monthly pension.