Economic Survey 2022-23: Pension Literacy Poses ‘Significant Challenge’

The Economic Survey 2022-2023 points out that the country is transitioning to a high middle-income economy with its pension sector witnessing tremendous scope for growth. With this in mind, the government initiatives towards enhancing pension literacy of subscribers to “encourage young adults to join the pension scheme would play a significant role in enhancing pension availability to a more extensive section of society,” it said.

The survey highlighted that the country’s pension sector witnessed an expansion on the back of increase in the total number of National Pension System (NPS) and Atal Pension Yojana (APY) subscribers. The survey showed “the total number of subscribers under the NPS and APY registered a YoY growth of 25.1 per cent in November 2022, with AuM witnessing a growth of 22.7 per cent during the same period. The overall contribution recorded an increase of 27.6 per cent in November 2022, with maximum growth registered by the All-Citizen model followed by the Corporate Sector.”

Meanwhile, according to a survey by the Pension Fund Regulatory and Development Authority (PFRDA) on the socio-economic characteristics of NPS subscribers for the five-year period from FY2017 to FY2021, it showed that 24 per cent were female subscribers and the rest of the 76 per cent were male subscribers. “This contrasts with a better gender balance in the case of APY where female subscribers under APY increased from nearly 38 per cent in the initial years of the scheme to around 44 per cent by March 2021. Among various states, enrolment from Maharashtra was seen to be the highest, accounting for 17 per cent,” it said.

Interestingly, the age profile of the subscribers in the APY scheme suggests increasing enrolments by youngsters. “As of August 2022, 44.8 per cent subscribers were between 18 and 25 years, as compared to  29.3 per cent as on March 2016. Further, more people are now opting for a pension amount of Rs 1000 per month.” As of March 2022, around 76 per cent of subscribers have opted for Rs 1000 per month pension amount, as compared to 38 per cent of subscribers as on March 2016. However, the number of subscribers opting for Rs 5000 per month pension has declined from 47 per cent  as of March 2016 to 15 per cent as of March 2022. “The coverage of the population in pension  under NPS and APY as a share of the total population has raised from 1.2 per cent to 3.7 per  cent during the six years FY17 to FY22,” the survey noted.

Additionally, government is reportedly implementing various pension schemes including the Indira Gandhi National Old Age Pension Scheme (IGNOAPS), Indira Gandhi National Widow  Pension Scheme (IGNWPS), Indira Gandhi National Disability Pension Scheme (IGNDPS)  under the National Social Assistance Programme (NSAP) with a total beneficiary coverage of  4.7 crore.

According to the survey, the assets as a proportion of GDP have increased from 1.2 per cent to 3.2 per cent, reflecting that the pension sector is progressing much faster than the nominal growth of the economy and population. “PFRDA has undertaken various measures to ease the accessibility of NPS and APY to subscribers, such as reducing timelines for processing settlements to T+2 days.” While central record keeping agencies have integrated their systems with DigiLocker to provide subscriber centric services such as electronic-Pension Retirement Account Number (e-PRAN), electronic account statements, and Aadhaar and DigiLocker-based account openings.

The survey noted further that the country has tremendous scope for growth in the pension sector “as per capita income is expected to rise further as the economy transitions to a high-middle-income country. India’s demographic structure, with a more significant proportion of younger people, favours a phase of accumulation.” It has observed that financial literacy still poses “significant challenge not only in emerging market economies but also in advanced economies.” Notably, PFRDA, under the Financial Stability and Development Council (FSDC), has taken several steps to “enhance financial education so that consumers can make informed decisions and reap the benefit of the formal financial sector  while being cognizant of risks and various trade-offs involved. These include pension education through print and electronic media, outreach programs through trade bodies, intermediaries such as banks, and town hall events.”