PFRDA proposes auto-enrolment under pension scheme

With a view to widening the social security net among unorganised sector workers, regulator PFRDA has proposed a scheme under which employers will have to automatically enrol workers under the Atal Pension Yojna.
As pension is a long-term engagement and keeping in view the income profile of the targeted group, PFRDA in a concept paper also proposed using insurance and health coverage as an incentive for long-term engagement.
India has a huge unorganised or informal sector. Around 83 per cent of the workers are in informal employment where there is no formal employer-employee relationship.
Furthermore, a number of workers are self-employed in the agriculture sector and small businesses like tea stalls, which also include street vendors, hawkers, rickshaw pullers, maids and drivers.

"A mandatory scheme for such workers is just not possible. Voluntary schemes such as the NPS Lite or Swavalamban and APY which are primarily focused on this category of workers have also not witnessed very encouraging response," the Pension Fund Regulatory and Development Authority (PFRDA) said.
PFRDA said international experience suggests extending pension to workers on a voluntary basis is not very successful.

"It is in this context that an auto-enrolment is being proposed to expand coverage of pension or old age income security to a larger segment of society," it said.
Enterprises which could be sole proprietorship, partnership with less than 19 employees "will be required to automatically enrol all their full-time employees into APY".

Insurance components like insurance coverage of health and life may be bundled with APY to take care of health and life contingencies of the members, the paper said.
"The automatic enrolment with health and insurance cover under APY is expected to enhance the coverage, particularly in the unorganised sector, and help in saving for their retirement while they are earning. As employer contribution is voluntary, an affirmative action, there may not be much resistance to this change," the paper stated.
Comments have been invited till October 7.
Employers, the paper said, must automatically re-enrol their eligible jobholders who choose to opt out or cease to be active member on a three-year cycle.

This will give employees opportunity to reconsider their decision to opt out at regular intervals in case their situation has changed since then, it added.
The informal sector groups proposed for auto-enrolment are micro industries and enterprises, small scale industries, Asha, anganwadi, construction sector and gram panchayat, among others.