Pension reforms in India: unresolved issues and policy choices

Abstract

Ageing populations with increased life expectancy, low mortality rates, and decreasing and volatile returns in financial markets have made old age financial security difficult. Developing countries like India, in fact, face a bigger challenge. India lacks a social security framework and the ageing population has to largely depend on extended families and other informal means for Old age security. The vast majority are not covered by a formal pension system; they rely instead on their own earnings and transfers from children. The traditional and informal methods for income security, such as the joint family system in India, are increasingly not in a position to cope with the enhanced life span and medical costs during old age. Further, escalating costs of the pension system are forcing the Indian government to re-evaluate its programmes providing social security to its employees.