According to the IIMS Dataworks' report titled "The Sleeping Giant: Private Pension Markets in India", the informal sector workers are ready to participate in a retirement savings scheme with NPS-type features if it is offered now. NPS is a defined contributory pension scheme with returns linked to the market.
If the informal sector workers are offered the scheme, they will contribute Rs 57,000 crore in 2008-09. A participation at this level would produce a Rs 1,208,538 crore corpus in the twelfth year of operation ie 2020.
NPS is meant for informal sector workers, most of whom do not have any retirement plan for future. However, the scheme has not been extended to them as the Pension Fund Regulatory Development Authority Bill is yet to be passed by the Parliament.
The estimates are based on three income groups having annual income of less than Rs 1 lakh, 1-2.5 lakh and over Rs 2.5 lakh. The three groups were assumed to have contribute 5 per cent, 6.25 per cent and 7.5 per cent of their annual income.
While projecting the corpus for the next decade, exit age was fixed at 58 years, the number of people likely to exit or join the workforce, contribution capacity and contribution rate were taken into account.
The central government and 19 state governments have made the scheme mandatory for their employees joining services from January 1, 2004. With only 2 per cent of the workforce in the country working in the government sector, the real potential can be realised only after the informal sector is covered.
