Presently, the Indian economy is growing with the growth of national income and per capita income, while society is facing the problem of an increasing number of persons in old age and the gradual erosion of the joint family system. The existing social security schemes do not cover the large mass of the working population. The author argues that a micro pension plan, involving active participance of the people in the unorganised sector in building their own pension, could be a solution to the future "age bomb". A small amount of contribution from each such member would generate a large chunk of funds that may be useful for the growth of the national economy, development of infrastructure and reduction of volatility in the stock market. The most gratifying achievement would be that these people may be saved from the threat of poverty during their old age, although many of them are maintaining a satisfactory standard of living during their working life. The paper describes the proposed design of the Micropension scheme, introduces several investment schemes and provides corresponding approximate estimations of the potential pension accumulated over the period of 40 years from the monthly contribution of 250 Rs.
Copyright 2010 by the Society of Actuaries, Schaumburg, Illinois. Reprinted with permission.