India has the second weakest pension system in the world.

Pension is a regular (normally monthly) payment that a person gets when he/she has retired from a job. This regular payment is obtained from an investment fund to which that person, or his/her employer, contributed during the time the person was working. At a time when you are no longer young enough to work, it is the pension that comes to your aid.

People working in the organised sector, and their employers, contribute to the Provident Fund (which is effectively a retirement fund). Upon a person’s retirement, he/she gets the entire sum at one go which can then be used to invest in a scheme that gives monthly income or to build a house or finance a child’s wedding or education, etc.

In India, the Pension Fund Regulatory and Development Authority is the prudential regulator for the New Pension Scheme. This scheme promises regular income based on the amount of money you invest in it during the time you are earning.

India has the second weakest pension system in the world.

The Pension Sustainability Index systematically examines relevant elements of pension systems in order to measure and evaluate the pressure on governments to reform their national pension systems. India is under the most reform pressure. Extremely low pension coverage in the country remains the primary challenge to India’s pension policy. Adequate steps have yet to be implemented to see to it that pension coverage increases in India.

Only 12 per cent of the enormous Indian population of 1.21 billion is covered by any type of formal pension arrangement at all.

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