A Pension Index for India

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Value of Notionally Secured Pensions Index

A Pensions Index for India

By V.N.Sreekaran Pillai

Synopsis

There is no literature on developing an index to measure the appropriateness and sufficiency of pensions paid in a country. However, there is one pension-index known as the Melbourne Mercer Global Pension Index, an analysis of which shows that it is complex, sophisticated and comprises of many factors that makes it less appealing. In India’s case some of its foundations are factually incomplete.

This Paper introduces three new concepts, viz.      

(i)      Per Capita Value of Notionally secured Pensions, that covers all defined benefit and defined contribution pensions in the country

(ii)      Modified Per Capita Income, i.e. per capita income from which pension income that is included in it  is removed and

(iii)         Population figure comprising of persons who are eligible to be contributors to and  recipients of pension (instead of mean population of the year)

and develops a Pension Index for India, which is the ratio of per capita value of notionally secured pensions to modified per capita income.

This paper has come up with a truly innovative concept that can make India the first country in the world to implement a Pension Index.

The ideal value of the Pension Index for India is 1, which means per capita value of notionally secured pension is equal to modified per capita income. In reality the Pension Index for India [for the year 2012-13] is 0.05, meaning thereby that for every rupee of pension to be paid we have made a provision of 5 paise only.

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