Pension fund for India’s informal sector nears reality with ADB help

A privately-run pension fund for the informal sector will soon be established in India which could result in a higher savings rate, and more investible funds for the economy.

The Asian Development Bank (ABD) recently approved a $1-million technical assistance (TA) grant, which would lay the foundations for a pension system for India’s unorganized or informal sector.

The grant, financed by the Government of the United Kingdom, will help develop voluntary privately managed pension schemes to provide retirement savings for India’s unorganized or informal sector, to complement existing social protection arrangements for workers in the formal economy.

"The pension system reforms are essential to domestic capital market development and meeting the needs of India’s growing population, particularly the poor," ADB financial/capital markets specialist Valiyoor Subramanian said.

The TA will help fund a nationwide survey. Based on an evaluation of survey results and other data gathered and their implications, possible pension schemes that meet government requirements and the identified needs of the unorganized sector will be developed and appropriate marketing strategies laid out to reach the potential target markets.

A regulatory and development framework will then be designed to promote the orderly development of the pension system for the unorganized sector, with the TA also determining the most suitable service providers for the pension schemes.