OASIS

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OLD AGE SOCIAL & INCOME SECURITY

The research studies commissioned by Project OASIS suggest that a pension provision for India, considering the huge diversities in income, savings capacity, literacy and the variety of employment categories will necessitate the formation of a multitude of pillars including the existing, mandatory, defined contribution provision of the Provident Funds, the voluntarily funded PPF, as well as a new contributory pillar (primarily for those not presently covered by any other formal pension provision).

However, most individuals are myopic during their earning lifetimes with regard to saving for their old age and may thus be reluctant to save adequately for their old age income security in a purely voluntary environment. We must educate people that old age is inescapable and that saving for old age could be a painless process if started early in life. It is thus desirable for the prevalent mandatory, contributory pillar - provident funds, which have been performing a singularly significant and sustained role in enabling employees to save for their old age - to increase its coverage, improve returns and reduce its potential dependence on any (non-funded) government subsidies.

The research and recommendations under Project OASIS have been segregated into two phases. The Report of Phase-I has concerned itself with rationalising and further improving existing provisions of the Employee Provident Fund (EPF), the Employee Pension Scheme (EPS) and the Public Provident Fund (PPF). The recommendations are aimed at enabling these provisions to more effectively fulfil their objectives of providing life long economic security during old age to their members and better realise their full, intended potential by removing systemic distortions and discriminations. The Phase-I report also recommends the formation of a National Senior Citizen's Fund for encouraging, catalysing and complimenting private sector efforts for betterment of life of senior citizens in the country and for advocacy, research and new initiatives.

Problems and Diagnosis

Economic security during old age should necessarily result from sustained preparation through lifelong contributions. The government should encourage fully funded old age income security systems that emphasise the values of thrift and self-help. The government should step in only in case of those who do not have sufficient income to save for old age.

The existing provident fund or pension programs accessible to Indian workers do not adequately solve the problem of income security in old age. For an individual retiring at age 60 with the prevailing balances (average Rs. 25,000), the provident fund system can only be a minor aspect of income security in old age.

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