7KH3URMHFW2$6,65HSRUW: (Old Age Social and Income Security Project)

7KH3URMHFW2$6,65HSRUW
(Old Age Social and Income Security Project)

11 January 2000
OASIS Foundation, 304-A, Gokul Arcade, Sahar Road, Andheri (East), Mumbai-400 057, India
Phones: +91-22-5691 9756 to 59. Facsimile: +91-22-5694 3967. Email: gautam@iief.com
The Project OASIS Report
2
11 January 2000
Ms. Maneka Gandhi
Minister o State ,IC,
Ministry o Social Justice and Lmpowerment
Goernment o India
Shastri Bhawan
New Delhi 110 001
Dear Ms. Gandhi:
I hae great pleasure in submitting the Report o the Project OASIS Lxpert Committee
or Deising a Pension System or India set up by your Ministry in 1998.
\ours Sincerely,
S.A. Dae
3
1he Project OASIS Committee: Members
Dr. S. A. Dave Chairman
Anand Bordia
Joint Secretary, Ministry o Social Justice and Lmpowerment
Goernment o India
Dharmendra Deo
Joint Secretary, Ministry o Social Justice and Lmpowerment
Goernment o India
Late R.S. Kaushik
Central Proident lund Commissioner, Ministry o Labour
Goernment o India
C. S. Rao
Joint Secretary ,Insurance,, Ministry o linance
Goernment o India
A.P. Singh
Deputy Secretary, Ministry o Social Justice and Lmpowerment
Goernment o India
Atul Chaturvedi
Deputy Secretary, Ministry o Social Justice and Lmpowerment
Goernment o India
Dr. Ajay Shah
Associate Proessor, IGIDR
Nalin 1hakor
Chairman, 1hakor & Associates
Gautam Bhardwaj Member-Secretary
Director, Inest India Lconomic loundation
4
Contents
J Backdrop S
1.1 Demographics 5
1.2 Labour Market & Old Age Income Security 6
1.3 Lxisting Proisions or Goernment Lmployees
1.4 Mandated Proisions or Organised Sector 8
1.5 Proisions or Unorganised Sector 10
1.6 Project OASIS 11
2 Goals J3
3 A New Pension System J7
3.1 Serice Deliery 18
3.1.1 Centralisation o Record-keeping and Indiidual Access 20
3.1.2 1he Role or I1 in Lowering 1ransactions Costs 21
3.2 Pension lunds Management 22
3.2.1 Lntry o Pension lund Managers 22
3.2.2 Styles 22
3.2.3 Prudential Regulation 23
3.2.4 Relatie Returns Guarantee or Sae Income` Style 24
3.2.5 Contribution Protection Insurance 24
3.2.6 Indiidual Control o Assets 24
3.2. lacilitating Indiidual Choice 25
3.2.8 Allocation by Indiiduals with Low linancial Knowledge 25
3.2.9 Retirement Adisors 26
3.2.10 Role or NGOs 26
3.3 Contributions 26
3.3.1 Indiidual, Voluntary Contributions 2
3.4 Beneits 2
3.4.1 Normal \ithdrawals 2
3.5 1ax 1reatment 28
5
3.6 Micro-credit and \ithdrawals 29
3. Lstimated Costs 30
4 Regulatory Iramework 32
4.1 Oersight o lunctioning and Growth 32
4.2 Intermediaries 33
4.3 Lntry o PlMs 33
4.4 Lnorcement 35
4.5 Relatie Return Guarantee 36
4.6 Adocacy and Lducation 36
4. Inormation Standardisation and Dissemination 3
4.8 Research 3
4.9 Organisational Issues 3
S Reform to Lxisting Pension Provisions 38
5.1 Reorm to Lmployees` Proident lund 38
5.2 Reorm to Lmployees` Pension Scheme 1995 39
5.3 Reorm to Public Proident lund 40
5.4 Goernment Pension Scheme 41
5.5 National Senior Citizen`s lund 41
5.6 Caring or 1oday`s Old 42
6 Implementation Path 43
Glossary 4S
Acknowledgements 47
6
J Backdrop
J.J Demographics
,a, Populations world-wide are ageing. In India, while the total population is expected
to rise by 49 between 1991 and 2016, the number o elderly ,persons aged 60 and
aboe, is expected to increase by 10, to 113.0 million. In other words, the share
o the aged in the total population will rise to 8.9 in 2016. Demographic
projections urther suggest that the number o the aged will rise een more rapidly
to 19 million by 2026 - or to 13.3 o the population.
,b, Males and emales in India at age 60 today are expected to lie beyond 5 years o
age. 1hus, on an aerage, an Indian worker must hae adequate resources to support
himsel or hersel or approximately 15 years ater retirement. Demographic
projections suggest that a orty year old today, who will be 60 in 2020, will hae an
expected lie span o 20 years beyond 60, i.e. to age 80.
,c, \hile we witness an increase in the number o aged, the traditional and inormal
methods or income security, such as the joint amily system in India, are
increasingly unable to cope with the enhanced lie span and medical costs during old
age. 1here is a growing stress on the joint amily system and there is an immediate
need or introduction o ormal, contributory pension arrangements that can
supplement inormal systems. 1his problem is particularly important in India, which
will enter its demographic transition, into increasing number o aged persons, at
lower income leels than those seen in other countries which hae long introduced
systems to cope with the problems o an ageing population.
,d, 1raditionally, goernments and societies proide economic security during old age
through pension proisions and social saety nets. Sound pension systems orm a
social saety net or reducing poerty during old age. Howeer, a rise in the number
o older persons oten causes a corresponding increase in goernment expenditure
on non-contributory pensions and health serices - since health and pension
spending rise together. Higher goernment spending on old age security has oten
been at the cost o expenditure on other important public goods and serices and
has increasingly been a serious drain on goernment inances.
7
J.2 Labour Market & Old Age Income Security
,a, Approximately 4.20 o India`s population lie in rural areas ,1991 census,. 1he
per capita income in India ,at 199-98 prices, is Rs.13,193.
As per the 1991 Census data, India has an estimated 314 million workers. O the
working population, 15.2 ,4 million, are regular salaried employees while oer
53 ,166 million, are sel-employed and 31 ,9 million, are casual,contract
workers.
O the salaried employees, approximately 23 ,11.13 million, are employed by the
Central, State and U1 Goernments and Departments ,including post & telegraph,
armed orces and railways, and are eligible to a non-contributory, indexed, deined
beneit pension, unded entirely by the Goernment.
Approximately 49 ,23.18 million, o the salaried ,non-Goernment, workers are
coered by a mandatory Lmployee Proident lund and the Lmployee Pension
Scheme.
1hus, barely 34 million ,or less than 11, o the estimated working population in
India is eligible to participate in ormal proisions meant to proide old age income
security.
,b, On the other hand, 28 ,13 million, o the salaried workorce, and approximately
268 million workers in the unorganised sector ,including armers, shopkeepers,
proessionals, taxi-driers, casual , contract labour, etc., are H[FOXGHG rom
participating in the existing proisions. 1hereore, almost 90 o India`s workorce
are not eligible to participate in any scheme that enables them to sae or economic
security during their old age.
,c, As a result, there is a serious threat that a majority o these workers, who may not be
below the poerty line in their working lies, might sink below the poerty line in
their old age, simply because they hae not accumulated enough saings during their
years in the workorce. 1his problem is urther compounded since they will hae to
incur heaier expenditure on health during old age, neglect o which would only
worsen their quality o lie.
8
,d, Demographic transition coupled with poor coerage by existing proisions suggests
that we are inexorably moing towards an India with a gigantic number o destitute
elderly. laced with such huge numbers, a social saety net or retired workers or a
poerty alleiation program which aims to pay een a modest subsidy would require
a staggering expenditure - much beyond the capacity o the Goernment.
J.3 Lxisting Provisions for Government Lmployees
,a, Goernment employees receie a non-contributory, indexed, deined beneit
pension, unded entirely by the State. 1hey also contribute 6 o wages into a
proident und scheme. Spending on such non-contributory pensions is an
enormous strain on reenues and will only increase oer time with an ongoing
increase in beneits as well as increasing lie expectancy o the population.
,b, According to the latest published data released by the Department o Lxpenditure,
Ministry o linance, there were 5.2 million Central Goernment employees as on
31st March 1998. 1hese include employees in railways, deence serices, posts, and
telecommunications. At the same time, the total number o Central Goernment
pensioners as on 31st March 1998 was 3.54 million - relecting a dependency ratio
o around 66 per cent.
,c, A simulation study to assess the increase in the number o Central Goernment
pensioners and the related expenditure on pension payments oer the next 30-40
years was carried out by the 1ata Lconomic Consultancy Serices, at the time o
preparation o the lith Central Pay Commission Report. Assumptions made were
that there is no rise in employment ater 1992, that wages escalate at 2.5 per
annum, that employees work or 33 years and enjoy 16 years o retirement, that the
annual number o retirements are three percent o the total establishment, and, that
the rate o inlation is 8 per annum. It has also been estimated that the successie
pay commissions will grant increases in real wages o around 1 eery 10 years.
1his study reealed that expenditure o the Central Goernment on account o its
own pensions would increase rom Rs.35,690 million in 1995 to Rs.2,1,830 million
in 2015.
,d, 1hese estimates are based on conseratie assumptions and do not consider two
important acets o the problem: Lxpenditure on pensions to Deence Serices
9
pensioners ,where the current dependency ratio is oer 110, as well as expenses
on pensions to employees o State Goernments were not included in this
projection. lurther, the aboe igures do not account or the increase in pensions
arising out o the lith Pay Commission's recommendations.
J.4 Mandated Provisions for the Organised Sector
,a, 1 industries and classes o establishments notiied by the Goernment and
coered by the LPl & MP Act, 1952, and which employ 20 or more persons, are
mandated to subscribe to the Lmployees` Proident lund Scheme 1952, the
Lmployees` Pension Scheme 1995, and the Lmployees` Deposit Linked Insurance
Scheme 196. 1hese schemes are managed by the Lmployees Proident lund
Organisation ,LPlO,, Coal Miners Proident lund, Seamen Proident lund,
Assam 1ea Plantations Proident lund, and the J&K Proident lund.
,b, 1he Lmployees` Proident lund ,LPl, Scheme is a deined contribution, publicly
managed plan under which accumulations are paid to workers as a lump sum on
retirement. 1he Lmployees` Pension Scheme ,LPS, is a deined beneit, publicly
managed plan that pays workers a monthly pension ater retirement. It is urther
claimed that the LPS is also a deined contribution plan and is ully unded. 1he
Insurance Scheme proides an additional payment in the eent o death or
permanent disability o a worker while in serice. All employees in these
establishments ,except those drawing a salary o oer Rs.5000 per month, are
mandated to participate and contribute to these schemes.
,c, Lmployers and employees are mandated to make equal contributions totaling
between 20 and 24 o employee`s wages towards the LPl and LPS. lrom the
employer`s contribution` o 10 to 12, 8.33 is dierted to the LPS while the
balance is pooled into the proident und account o the employees. 1he
Goernment contributes 1.16 o wages into the LPS. A contribution o oer 25
percent towards retirement beneits is among the highest in the world. High
contribution rates leae little or no surplus income or saings or other
contingencies by employees.
,d, 1he Boards o 1rustees o the releant Proident lunds handoer the unds thus
collected or management to a single und manager. 1he releant und manager is
10
strictly mandated to inest the unds as per the inestment guidelines deised by the
respectie Pl Boards. 1he unds are mainly inested in Goernment Securities or
Special Deposits o the Goernment, which oer a ixed return to members. Lach
year, the Boards o Pls announce an annual rate o return to their members. Oer
the last decade, Proident lunds hae announced a 12 nominal annual return ,or a
little oer 2.5 annual UHDO return on an aerage oer the last decade, to their
members. Indiiduals do not hae any control or choice in the allocation o ,and
returns rom, their saings.
,e, As on March 1998, 291 establishments, with approximately 4.5 million member-
workers, were exempted by the LPlO and allowed to manage the unds on behal
o their employees. 1hese exempted unds are mandated to equal or better the
annual beneits announced by the LPlO. 1he pattern o inestment by exempted
unds is identical to the pattern prescribed in the inestment guidelines issued by the
LPlO.
,, Proident und members are proided a acility to prematurely withdraw a part o
their retirement saings on account o marriage o sel and amily members,
insurance, education o children, housing and housing loan repayments, medical
expenses, temporary unemployment, etc. lurther, inal settlement and withdrawal o
ull accumulations with interest are allowed on account o retirement, permanent
disability, death, change o job to an uncoered establishment, or ater 2 months o
unemployment.
,g, Despite extremely high contributions, and as a result o liberal withdrawals and poor
returns, workers coered by the LPl are aced with highly inadequate terminal
accumulations and potential destitution in their old age. lor instance, the LPlO
distributed aerage terminal accumulations o less than Rs.25000 per member during
199-98 on retirement. In the same year, the LPlO allowed an aerage premature
withdrawal o Rs.1000 per member.
,h, 1he Lmployees` Pension Scheme ,LPS, oers deined beneits o up to a maximum
o 50 to the aerage o the last 12 month`s salary. Despite standardised deined
beneits, the contribution rates into the LPS ary across industries and classes o
establishments. 1he Boards o 1rustees inest the pension unds accreted by the
members using the same inestment pattern as prescribed by them or Proident
lunds. 1he Boards o Proident lunds are also responsible or payment o the
11
beneits - i.e. o conerting the lump sum accumulations under LPS into annuities
and payment o pensions to indiiduals.
,i, Actuarial calculations that compare the adequacy o contributions and returns on
inestments o the pension und to meet the deined pension obligations o the
Goernment are not readily aailable. 1here is also no indication that the beneits
under this proision are inlation indexed. 1here is a risk that this proision may be
underunded, and promises an unsustainable beneit which will become a liability o
the Goernment in the long run.
,j, LPl contributions, returns on them, premature withdrawals and terminal
accumulations are all ully tax exempted - while pensions are taxed. 1his proides
workers an incentie or lump sum withdrawals, instead o opting or annuities
during old age.
J.S Provisions for the Unorganised Sector
,a, 1he Public Proident lund ,PPl, was introduced in 1968-69 with the objectie o
proiding unorganised sector workers ,who are excluded rom participation in
mandated proisions, with a acility to accumulate saings or old age income
security. 1his is an indiidual account system under which members are allowed to
open PPl accounts either with some designated nationalised banks or with post
oices. As on March 1998, State Bank o India had 1.84 million PPl accounts
showing an outstanding balance o Rs.26 billion. As on March 1998, post oices had
0.92 million PPl accounts with an outstanding balance o Rs.24 billion. 1hese
accounts imply a combined coerage ,bank and postal accounts, o less than 1 o
the working population by this proision een ater 3 decades o its existence.
,b, 1he PPl account accepts accretions o a minimum o Rs.100 ,ixed in 1968-69, and
a maximum o Rs.60000 per member per year. 1he accretions, accumulations and
withdrawals rom PPl are ully tax exempted. A PPl account matures in 15 years -
which is inadequate or generating meaningul accumulations or old age income
security or younger workers. In addition, PPl allows partial withdrawals ater 5
years o accumulations. As a result o premature withdrawal acilities and tax breaks,
indiiduals largely misuse this scheme or legitimised tax easion and it does not
sere the intended purpose o old age income security.
12
,c, 1he Goernment has no proision or proessional inestment o the annual
accretions into this scheme. A corpus o assets ,securities, is not isible. Instead, a
part o the annual accretions into PPl are used or paying out the corresponding
year`s withdrawals rom the scheme. In addition, 5 o the net annual accretions
are distributed among State Goernments at 14 interest while the balance
accretions are dierted to the Public Account o the Goernment. 1he Goernment
pays a ixed 12 interest on accumulations under PPl. 1he actual cost to the
Goernment is een higher when orgone reenues rom income tax collections are
actored in. 1his is an expensie scheme with no assurance that its true objecties
will be ulilled.
J.6 Project OASIS (Old Age Social and Income Security)
,a, 1he Ministry o Social Justice and Lmpowerment is entrusted with the nodal
responsibility or care o older persons. 1he Ministry has been increasingly
concerned with the issues o ageing, health and income security during old age as
well as its close links to mental and emotional well being. Howeer, the Ministry
realises that poerty alleiation programmes directed at the aged alone cannot
proide a solution to the income and social security problems o our elderly. lor
instance, proiding a Rs.100 per month old age pension to the projected 15 million
population o the elderly in 2025, would translate into an annual outlow o oer
Rs.210 billion ,or Rs.21,000 crore, or the Goernment. laced with such large
numbers, it is apparent that the problem will hae to be addressed through thrit and
sel-help, where people prepare or old age by saings accumulating through their
decades in the labour orce. 1he role that the Goernment can play in this enterprise
is to create the necessary institutional inrastructure to enable and encourage each
citizen to undertake this task.
,b, As a culmination o this growing concern, and coincidentally with 1999 being
declared the ,QWHUQDWLRQDO<HDURI2OGHU3HUVRQV`, the Ministry commissioned the
national Project titled OASIS` ,an acronym or Old Age Social and Income
Security, and nominated an 8 member Lxpert Committee to examine policy
questions connected with old age income security in India. 1he Project OASIS
Lxpert Committee was mandated to make concrete recommendations or actions
that the Goernment o India can take today, so that eery young worker can build
13
up a stock o wealth through his or her working lie, which would sere as a shield
against poerty in their old age.
,c, 1he research and recommendations under Project OASIS hae a twin ocus: that o
urther improing existing proisions, and, to deise a new pension proision or
excluded workers who are capable o saing een modest amounts and conerting
this saing into an old age income security proision. 1he Report on reorms to the
existing proisions was submitted to the Ministry o Social Justice and
Lmpowerment in lebruary 1999.
,d, 1he objectie o this Report is to recommend a pension system which is can be used
by indiiduals spread all oer India, which enables them to attain old age security at
the price o modest contribution rates through their working career. It is simple and
conenient to use and has the capability or conerting modest contributions into
reasonably large and comortable sums in an almost risk-ree manner or old age
security.
14
2 Goals
,a, 1oday, we in India ace seere problems in the orm o poerty amongst the elderly.
In addition, three powerul orces are at work which ensure that the problem will
worsen in the years to come:
Improements in health are increasing longeity, which means that more people are
liing to eer-longer liespans. Present demographics suggest that a person who suries
to age 60 has on aerage, 1 years ahead o him. 1his number may rise to 25 years in the
coming decade. 1his would mean that a person who retires at the age o 60 has to plan
to lie or a quarter century without a wage income.
lamilies are becoming smaller as people hae ewer children. Geographical labour
mobility implies that children are increasingly likely to be geographically separated rom
their parents. Indiidual and social alues are changing so that the joint amily is
increasingly considered unattractie. All these actors are leading to a situation where
the young are increasingly unable or unwilling to hae parents liing with them.
Improements in education and health are generating new expectations on the part o
the elderly or the minimal leel o consumption that is considered acceptable.
,b, In the ace o this problem, it is clear that anti-poerty programs will simply not
suice in addressing the problem. 1he sheer number o the elderly is too large, and
the resources with the State are too small, to make anti-poerty programs the central
plank in thinking about the elderly. International experiences, and common sense,
suggest that Goernment dole is not sustainable on a signiicant scale, that economic
security during old age should necessarily result rom sustained preparation through
lielong contributions and the central alues that a pension system should emphasise
are sel-help and thrit.
,c, Hence, we need to establish an institutional inrastructure through which indiiduals
can prepare or old age while they are in the labour orce, i.e. an eicient pension
system. 1he role o the pension system is to encourage and enable old age
preparation on the part o a large raction o indiiduals presently working in India.
15
,d, Most indiiduals in India are outside the organised sector. 1hus the concept o a
regular monthly salary` is alien to most o India, and hence the concept o a
monthly pension contribution` is equally alien. 1he large number o workers who
are agricultural labourers or construction workers alls in this category. Unorganised
sector workers may change jobs, opt or spells o sel-employment, moe rom one
location to another and also ace temporary unemployment during their working
lies. A pension system or India should thus be lexible and useul to this mass o
indiiduals, not just to the small raction o people in India who work in the
organised sector, hae a regular monthly salary`, and undergo ery little job
mobility.
,e, 1ax incenties are more or less synonymous with old age income security saings in
India. Howeer, most indiiduals in India are not taxpayers, hence an exclusie
ocus on tax incenties as a ehicle to encourage pension saings is misplaced.
Indeed, in a situation where the rich in India pay taxes while most do not, tax
incenties which beneit the rich may oten proe to be regressie, as the reenue
orgone may be made good by some other orm o commodity taxation.
,, lrom a inancial perspectie, sound pension planning can be achieed by two
actors: ,a, by obtaining continuous, uninterrupted accumulations and ,b, by using
sound und management to achiee the highest possible rates o return. Once these
two ingredients are in place, the arithmetic o compound interest oer multiple
decades generates remarkable income security rom een modest low o saings. A
Rupee saed at age 25 turns into Rs..68 at the end o 35 years with a real rate o
return o 6. \hen either o these two eatures are absent, old age income security
is lost. I the accumulation is broken by withdrawal, o i low interest rates are
obtained through weak und management, then a much higher saings rate is
required in order to aoid poerty in old age.
,g, 1he terminal wealth at age 60 is highly sensitie to the rate o return. An
improement o one percentage point in the rate o return - i.e. rom 12 to 13 -
has the potential to yield a 20 higher corpus at age 60. I the interest rate goes up
rom 12 to around 15, it can double the terminal accumulations. Improing the
rate o return by such percentage points, without sacriicing long-term saety o
unds, is possible by appropriate modiications in inestment guidelines, and by
entrusting unds to proessional managers.
16
,h, lrom a political economy perspectie, a large stock o pension assets is a dangerous
thing. Pension programs ace large political risk. Pension systems in all countries
hae aced pressures rom a host o special interest groups who seek to obtain
minor` alterations o pension-related policies in order to beneit themseles. 1his
has ranged rom buying shares o public sector companies, inancing the
Goernment debt, transerring resources to states, inancing inrastructure,
subsidising ineicient inancial sector entities all the way to directed credit to
priority` sectors. Regardless o the merits o any o these claims, the only goal that
the pension system should sere is the wellbeing o indiiduals who are the
contributors and hence preparing themseles or old age. 1his requires sound
goernance and sound pension system design. Indiiduals participating in the
pension system should hae incenties to take interest in the unctioning o the
system and block appropriation o their retirement saings by such special interest
groups.
,i, 1he challenge in building a pension system also lies in obtaining low administratie
costs, nation-wide collection, and adequate simplicity or participation by millions o
people with highly limited inancial sophistication. 1he challenge also lies in
obtaining reedom rom raud, and in resisting the pressures which seek to apply
pension assets to urther any agenda other than that o old age income security o
members.
,j, Research commissioned by Project OASIS shows that regular saings at the rate o
between Rs.3 to Rs.5 per day through the entire working lie easily suice in
escaping the poerty line in old age SURYLGHGWKHSHQVLRQDVVHWVDUHLQYHVWHGZLVHO\. 1his is
an extremely heartening eature o pension system design in India, since we can
isualise an extremely large number o people in India today who can sae between
Rs.3 to Rs.5 per day and thus prepare themseles or old age income security. 1hese
numbers also remind us that low contribution rates are not the essence o the
problem.
,k, Systemic distortions and preerential treatment to certain proisions is undesirable
and we need to strie towards creating an equitable enironment and simpliied
proisions to encourage uniersal coerage both or salaried employees as well as
sel-employed persons.
17
,l, 1he pension system recommended in this Report can make an enormous dierence
in the orm o remoing millions o people rom the ranks o the destitute elderly in
the years to come. Lach additional person who is able to plan or old age income
security is one less rom the ranks that require the minimum support saety net in
old age.
1his powerul motiation is the central inspiration or this Report.
18
3 A New Pension System
1he new pension system should be based on LQGLYLGXDOUHWLUHPHQWDFFRXQWV. An indiidual
should create this account, hae a passbook where he can see a balance that is his notional
wealth at that point in time, he should control how this wealth is managed, this account
should stay with him regardless o where he is or how he works. He would make
contributions towards his pension into this account through his working lie ,whether
employed in the organised sector or not,, and obtain beneits rom it ater retirement or
the rest o his lie. A heuristic sketch o the operations o this system may be oered here.
,a, A person will open a single Indiidual Retirement Account ,IRA, with the pension
system at as early a point in his lie as possible. 1he account will proide the
indiidual with a unique IRA number that will stay with the indiidual through lie.
1he indiidual would sae and accumulate assets into this account in his working
lie, subject to a minimum o Rs.100 per contribution and Rs.500 in total accretions
per year. Indiiduals would be ree to decide the requency o accretions into their
accounts, there will be no pressure to make a ixed monthly contribution. 1he
account would stay with the indiidual across job changes, spells o unemployment,
and can be accessed at any location in India. 1he indiidual would always hae
access to an account balance statement showing his assets. All through, the
indiidual would be empowered in haing control o how his pension assets should
be managed. linally, upon retirement, the indiidual would be able to use his
pension assets to buy annuities rom annuity proiders, and obtain a monthly
pension.
,b, In this entire process, a sound regulatory ramework would gie indiiduals an
umbrella o saety with respect to problems o risk management and preention o
raud.
,c, A key eature o the system described ahead is a high ease o access to the pension
system through myriad Points o Presence ,POPs, which would be located all oer
India and will include post oices, bank branches, etc. 1he indiidual would be able
to isit any POP in India ,not just the POP where he had opened the IRA, and
conduct transactions on his indiidual retirement account. Lery POP would exhibit
identical eatures, processes and procedures. 1hese transactions would be extremely
19
simple and conenient, so as to require minimal knowledge about the inancial
sector.
,d, Indiidual accounts imply ull portability: i.e. the indiidual would hold on to a single
account across job changes across geographical locations. Indiidual accounts will
also gie indiiduals the opportunity to alter their risk proile in the lie cycle in an
optimal ashion ,rom high-risk, high-return inestments at a young age to a low-
risk, low-return portolio when approaching retirement, i they so desire, while
allowing them ull reedom and lexibility in making their own choices. Indiidual
accounts also interpret indiidual accumulations as indiidual wealth, they eliminate
the ree-rider problem o collectiist programs. 1he accumulation o retirement
assets, in a orm which is maniestly isible as indiidual wealth, helps reduce the
political risks that many pension systems hae suered rom.
3.J Service Delivery
,a, Indiiduals should be able to access and operate their retirement accounts rom
Points o Presence` ,or POPs, located all oer India. Any indiidual would be able
to obtain identical serices rom any POP located anywhere in India.
1he acilities that indiiduals should be able to access are extremely simple
1
:
Open an indiidual retirement account and obtain a permanent and unique IRA number,
Submit contributions into this account,
Obtain an account balance statement, and
Submit instructions goerning pension und management
,b, \e propose a two-tier system where POPs with good inormation technology and
telecommunications acilities would oer better serices than other technologically
constrained POPs. At a POP that has I1 and telecommunications acilities, all these
transactions would be satisactorily completed instantaneously. At other POPs, there

1
It is useul to obsere that in the accumulation phase - where the bulk o transactions o the pension
system are likely to take place or the next 40 years - the risk o raud is airly limited, since there is no pay-
out o beneits. A person has little to gain by raudulently depositing a contribution into the pension account
o another person.
20
would be delayed responsiity: or example, when the indiidual asks or an account
balance statement, he would get it a ew days later.
,c, \e need to harness the largest number o POPs possible, while preerring POPs
which hae I1 and telecommunications acilities. 1he unierse o POPs would
include:
Bank branches
Post oices
Depository participant oices
Any other location rom which electronic connectiity into a central computer system is
possible
2
.
,d, 1here are around 64,000 bank branches in India, all o which could be POPs. 1he
postal system, in particular, is an ideal deliery mechanism that the pension system
should harness. 1here are 153,000 post oices that are presently processing money
orders. \e can think o a pension contribution as a money order into the pension
system, in which case the processes and success in preenting raud which presently
exist, in the context o money orders, are o great alue. 1he postal system operates
on the principle that the net unds at any branch post-oice or sub post-oice are
cleared on a daily basis, only head post-oices maintain unds. 1his integrates
eiciently into the pension system: the head post-oices can interact with the
banking system to transer unds to the pension system. 1he department o posts
has also experienced signiicant success with a large-scale implementation o I1 and
telecommunications systems.
,e, In summary, the existing number o potential POPs that can be immediately
harnessed into the pension system is adequate to reach hundreds o millions o
indiiduals in India. In addition, the rate o growth in the number o I1-equipped
POPs is ery high. Oer the years, the spread o inormation technology and
telecommunications would enable high quality serice deliery through hundreds o
thousands o locations.

2
1here are many priate initiaties in constructing POP networks. lor example, U1I, IDBI, ICICI, SHCIL,
etc. hae all built POP networks with hundreds o POPs, which could be harnessed into the pension system.
21
3.1.1 Centralisation of Record-keeping and Individual Access
,a, 1he international experience with indiidual accounts suggests that the key concern
is that o the administratie and transactions costs aced by indiiduals.
Decentralised indiidual account systems tend to run up high costs when
Multiple pension und managers build proprietary collection machinery, and
Pension und managers incur large marketing and distribution costs.
,b, 1he enironment with indiiduals acing complex choices between alternatie und
managers with dierent customer interaces would also inhibit participation by
indiiduals with highly limited knowledge about inance. lurther, all costs ,including
those on building multiple collection systems and o sales, are ultimately passed on
to indiiduals and can signiicantly retard the accumulation o pension assets.
,c, Howeer, by building public inrastructure to support indiidual accounts, we can
greatly impact on these costs.
Figure 1 Institutions for an Individual Retirement Account System
,
22
,d, \e recommend that the Goernment should obtain centralisation o record keeping
and indiidual transactions through a centralised depository. 1he depository would
be connected to the myriad POPs spread across the country. An indiidual would be
able to access any POP and conduct all transactions. Indiiduals would be able to
submit instructions with any POP which would transmit these to the depository,
which would in turn implement them with the releant Pension lund Managers
,PlMs,. 1he accent on modern I1 and communications, with a modern depository,
would yield superior serices and a reduced risk o raud, at a lower cost.
,e, 1he basic architecture o the system is hence one where indiiduals deal with POPs,
which carry these instructions to the depository. 1he depository would maintain the
database o all indiidual accounts as well as the instructions gien by each
indiidual. 1he depository would consolidate indiidual instructions into blocks o
unds, which will be handed oer to PlMs. In this system, PlMs would be able to
ocus purely on what they do best - i.e. lund Management. 1hey would only obtain
a single instruction rom the depository eeryday, which will drie the assets under
their management. 1his would make it possible to sharply drop the ees and
expenses in und management.
,, PlMs would be proided the database o indiiduals who hae chosen them. 1his
would make it possible or PlMs to understand their user proiles, optimise sales
strategies, and oer improed serices directly.
,g, 1he Depository will proide an IRA balance statement to each indiidual once eery
six months. 1his Statement will be orwarded at no cost to the indiidual through
the POP located closest to the indiidual`s contact address.
3.1.2 The Role for IT in Lowering Transactions Costs
1echnology-intensie solutions are oten conceied to be expensie. Howeer, an essential
insight into the problem o transactions costs is that the deployment o computers and
telecommunications is the essence o lowering transactions costs. \e oer three examples
that illustrate this urther:
,a, 1he experience o the Department o Posts is instructie. 1heir aerage transactions
costs associated with money orders in the pre-computer world were Rs.32 per
23
transaction. lor the post oices, which hae adopted modern I1, this cost has
dropped to Rs.12-16 per transaction. 1his experience is highly releant or the
purpose o pension system design, where contributions into a pension account can
be seen as money orders into a pension system`.
,b, India's stock market has seen a ten--old reduction in transactions costs owing to the
deployment o technology rom 1994 onwards. 1he total transactions costs used to
be around 5 or retail transactions in around 1993, today they are around 0.5 on
the National Stock Lxchange.
,c, Citibank's technology-intensie 6XYLGKD` bank account ,in Bangalore, deliers high
quality banking serices while only requiring a minimum balance o Rs.500 in an
account, this is in contrast with other banks which require a much higher minimum
balance or comparable serices.
3.2 Pension Iunds Management
3.2.1 Entry of Pension Fund Managers
1o begin with, six proessional pension und managers ,PlMs, should be selected to
manage the retirement unds under this system. 1he rationale and process associated with
this is presented in Section 3.2.6
3
.
3.2.2 Styles
Lery scheme oered by any PlM would hae to all into one o predeined VW\OHV. 1he
pension system would oer three styles - Sae Income`, Balanced Income` and
Growth`. Lach o the six PlMs would run one scheme each in the three styles, giing 18
schemes, in all, which indiiduals can choose rom. 1he inestment guidelines or these
styles are speciied in 1able J
4
.

3
1here is one weakness o a system with a VPDOO number o PlMs: the problem that regulatory diiculties
with a ery large` PlM would turn into diiculties or the State since the PlM is too big to ail` ,1B1l,.
I the aerage PlM has assets o Rs.300 billion - which is hal the size o today's U1I - then six PlMs
would hae assets o Rs.1.8 trillion. Hence, there is a case or increasing the number o PlMs rom 6 to 10
when the total assets o the pension system cross Rs.2 trillion.
4
1he rationale or these may be summarised as ollows: Government of India Securities - in general, the
rates o return on securities issued by the Goernment o India oer the lowest price olatility and the
24
Table 1 Investment guidelines for three styles
Safe Income Balanced Income Growth
Goernment Paper 50 30 25
Corporate Bonds 30 30 25
Domestic Lquity 10 30 50
O which, International Lquity 10 10
3.2.3 Prudential Regulation
On one hand, asset classes such as corporate bonds or equities oer much higher returns
and are clearly a desirable component o pension asset management. \et, these asset
classes throw up signiicant problems o prudential regulation. In India, we hae
experienced a ariety o scandals in the inancial sector. 1his has led to legitimate concerns
about liberalisation o pension asset management. In order to obtain higher rates o return,
and thus bring income security in old age within reach o indiiduals who can make small
contributions such as Rs.3 to Rs.5 per day, we need to establish a mechanism or
prudential regulation which ,a, harnesses the rate o return o the asset class, while ,b,
aoiding the risks o raud or scandal.
1owards this end, the strategy that should be adopted or three asset classes should be as
ollows:
,a, lor the irst ie years, all domestic equity inestments should be implemented using
index unds on the NSL-50 or the BSL-100 indices only. 1here should be no actie
und management` ,where und managers hae discretionary control o which
shares to buy,. Pension unds should not engage in o-exchange transactions on
domestic equities: this helps ensure a high degree o transparency in all transactions
and a lower incidence o murky market practice. 1hese rules would make it possible
or pension assets to harness the equity premium` ,the higher return o equities,

lowest long-run rate o return. Corporate bonds oer higher rates o return when compared with
goernment paper, at the price o somewhat higher risk. Lquities - oer the highest rates o return, oer
multi-decade horizons. A well-diersiied international equity portolio - oers a superior risk,return
tradeo when compared with the poor diersiication implied by a portolio which only contains Indian
equities.
25
while suering rom none o the risks that low rom giing und managers
complete reedom in orming share portolios.
,b, Inestments in corporate bonds should be limited to inestment grade corporate
bonds in India which are liquid. Liquidity helps ensure that the secondary market
prices o bonds ,which are used in aluation o pension assets, are reliable. 1he
deinition o a liquid bond should be as ollows: the aerage impact cost ,on the
most liquid exchange in India, at transaction sizes o Rs.100,000 should be below
0.3.. Pension unds should not engage in o-exchange transactions on corporate
bonds: this helps ensure a high degree o transparency in all transactions and a lower
incidence o murky market practice.
(c) International equity inestment should only be implemented using index unds.
3.2.4 Relative Returns Guarantee for Safe Income Style
In the Sae Income` style, PlMs would hae to supply a guarantee that they would not
underperorm the weighted aerage returns o all managers in that style by worse than 2
percentage points in a year. lor example, i a PlM underperorms the weighted aerage
returns under the sae income` style by 5 in a year, he would be required to make good
the 3 shortall in returns to the indiidual subscribers.
3.2.5 Contribution Protection Insurance
An additional saety net in the pension system is that i, or any reason, the inal pension
assets o a participant are smaller than the sum total o all contributions, then the
insurance coer would reimburse this dierence. 1his would be applicable only or
indiiduals who hae contributed or at least ten years.
1o a signiicant extent, the Goernment can purchase this insurance rom insurance
companies. 1he Canadian pension system uses a similar notion. 1here is a role or
Goernment guarantees in oercoming some residual risks here.
3.2.6 Individual Control of Assets
,a, \hen the indiidual goes to a POP with saings ,which could be as little as Rs.100,,
he would need to ill out a orm with 18 inestment options where he can make a
26
choice. I he does not eel conident in making this choice, he could opt or the
deault` allocation described ahead.
,b, An indiidual would be able to go to a POP at any time, and submit a orm with
instructions or transer o part or ull assets rom one scheme to another. 1he POP
would send the instruction to the depository to this eect, which would pool
indiidual instructions into a single consolidated instruction to the PlMs eery day.
I the POP lacks electronic connectiity, it would take a ew days or the instruction
to take eect.
,c, A uniorm exit ee ,load, o 0.5 would be applied on all transers across PlMs.
1ransers o assets between schemes o the same PlM would carry a zero exit load.
3.2.7 Facilitating Individual Choice
It is extremely important to make it conenient or indiiduals spread all oer India, most
o whom hae limited inancial knowledge, to use the inestment choices o this system.
1he ocus on 6 und managers oering 3 styles each is a part o that eort. Here,
indiiduals would hae exactly 18 schemes to choose rom
5
.
1here would be an institutional mechanism ,described ahead, through which a VLPSOH
quarter-page adertisement would appear in all national newspapers, summarising the
historical perormance o all the 18 schemes. lor example, it would be easy to choose the
best scheme in the Balanced Income` style by comparing the return obtained by the six
competing PlMs. A poster containing this table would be prominently displayed at each
POP`s oice.
3.2.8 Allocation by Individuals with Low Financial Knowledge
lor indiiduals who are incapable o deciding between schemes and und managers, there
would be an alternatie choice titled Deault Allocation`. Under the deault allocation,

5
A small number o PlMs is also superior rom the regulatory standpoint. 1he media scrutiny o six PlMs
would be much better than the media scrutiny on a large pool o PlMs. \e can imagine the pension
regulator running one inspection on each PlM eery month when there are only six PlMs. lor a
comparison, SLBI today has an external auditor run an audit o each mutual und once a year.
27
accretions would be placed into the Sae Income` style, and with the scheme that has
proided the highest return oer the last one year
6
.
In the irst year, and in the absence o historical perormance data, unds accreted into the
Deault Allocation` would be channeled to the PlM which has quoted the lowest
consolidated expenses plus ees.
3.2.9 Retirement Advisors
A large pool o indiiduals with limited inancial sophistication would participate in this
system, and would need to make choices about asset management questions. Len though
the basic design o the pension system is oriented towards making it simple, and not
require inancial sophistication, there will be an important role or sound adice on
lietime inancial planning on the part o indiiduals.
Hence, the design o the pension system should include a Sel Regulatory Organization
,SRO, that will be registered with the Indian Pensions Authority. 1he SRO will acilitate
training and certiication o a large base o retirement adisors`. 1hese RAs will also be
registered by the IPA and permitted to undertake adocacy as well as proide adice and
assistance to indiiduals regarding lietime inancial planning.
3.2.10 Role for NGOs
In obtaining the transition o millions o indiiduals into the pension system, Non
Goernmental Organisations ,NGOs, can play a key role in education and adocacy. Len
ater indiiduals hae opened indiidual retirement accounts, NGOs can play an important
role in ,a, obtaining steady contributions, and ,b, imparting knowledge in connection with
the arious choices that indiiduals in the pension system ace.
3.3 Contributions
1he pension system should require a modest minimum contribution rate o Rs.500 per
year. Beyond that, mandatory contributions are not meaningul. 1he spacing o
contributions across time should be let lexible, and the size o each accretion should be
let lexible ,subject to the requirement that each contribution should exceed Rs.100,. 1his

6
In case there is a tie, unds will be inested in the scheme that has the highest returns since inception.
28
minimum mandatory contribution leel ,o Rs.500,year, should be periodically reised to
keep pace with inlation.
Indiiduals who ail to meet this requirement ,o contributing at least Rs.500 per year,
would be penalised by haling the size o the micro-credit acility aailable to them ,see
Section 3.6,.
POPs will proide indiiduals ,like daily wage earners, with a acility to accumulate smaller
accretions ,less than Rs.100, in an interest-ree pool that will stay with the POP. Once the
indiidual`s accretion in this pool becomes Rs.100, the POP will route the unds to the
PlM o the indiidual`s choice.
3.3.1 Individual, Voluntary Contributions
1he Committee debated at length about the role or compulsion in obtaining
uninterrupted contributions or in opening accounts, and is o the iew that these should
be oluntary and not mandatory. In a country o our size, it would be diicult to enorce a
mandatory system, which may lead to harassment and corruption.
3.4 Benefits
1he pension system design proposed here critically relies on annuity proiders who
conert the lump sum o assets ,attained at retirement, into a regular monthly pension ,or
a ariable annuity, until death. Annuities are a part o the lie insurance industry. \ith the
recent liberalisation o entry into lie insurance, it is likely that we will see improements in
the extent to which annuities are eiciently priced. 1he Committee is o the opinion that
the insurance industry will be willing to sell air priced annuities to indiiduals who hae
joined this pension system. In addition, insurance companies will be expected to be
innoatie in applying age and demographic characteristics to ary the price o the annuity
rom one indiidual to the next.
3.4.1 Normal Withdrawals
At age 60, an indiidual would be able to derie beneits rom his retirement account. 1he
pension system would require that the irst Rs.2,00,000 o accumulations be used or
buying an annuity and thus obtaining a monthly inlation-indexed pension o roughly
29
Rs.1,500 - which is well aboe the poerty line. Beyond that, an indiidual would be ree
to decide how his assets should be deployed
.
1his minimum mandatory annuitisation leel ,o Rs.2,00,000, should be periodically
reised to keep pace with inlation. Premature cessation o accumulation ,e.g. owing to
retirement beore age 60, would be possible only i 100 o the assets are annuitised.
3.S 1ax 1reatment
,a, 1he Committee is acutely conscious o the iscal challenges aced by Goernment o
India. At the same time it beliees that the Goernment has an obligation to make
the lies o senior citizens as comortable as possible. It examined the current
incenties aailable on arious schemes or retirement income, and is o the opinion
that they are adequate, proided the unds are inested in a manner which can earn
higher returns. Rs.60,000 contributed or 35 years at the real rate o return o 5
percent would ensure a monthly annuity o about Rs.45,000 ,at 1999-2000 prices,.
Len i the real rate o return were only 3 percent, a monthly annuity would be
Rs.30,000.
,b, 1he Committee is aware that some discrimination against sel-employed persons
would arise, since contributions totaling up to Rs.1,20,000 by employees and
employers under mandated schemes are ully tax exempt whereas sel-employed
indiiduals - who are their own employers - will get only hal this beneit. Howeer,
such diering tax treatment o contributions by employees and sel-employed
indiiduals is not uncommon in other countries as well since the employer
contributions are considered a part o the oerall package` oered to employees.
1he Committee is deeply concerned about placing any additional direct or indirect

Research commissioned by Project OASIS reeals the ollowing scenarios or the accumulation that is
possible oer a lietime. \e assume a contribution rate o Rs.10 per day rom age 25 ,Rs3600 per year, till
age 60, growing at 3 per year. 1hen the terminal wealth proes to range rom Rs.0.2 million ,100
goernment bonds, to Rs.0.8 million ,signiicant use o equity index,. Hence, the minimum annuitisation o
Rs.200,000 is reliably attainable under the most conseratie inestment strategies as long as Rs.10 is
contributed into the pension account eery day rom age 25 till age 60, better inestment strategies bring
down this threshold to Rs.2.5 per day.
In the India o 2000 with an approximate aerage per capita GDP o Rs.20,000 per person per year ,or
Rs.80,000 per amily o our per year,, the unierse o potential participants in a pension system, who can
make contributions aeraging between Rs.2.5 per day to Rs.10 per day, should be airly large.
30
burden on Goernment inances and accordingly recommends that the tax-ree limit
or accretions into the IRA should continue to be a maximum o Rs.60,000 per
annum.
,c, Personal Income 1ax in India is a maze o complex exemptions and needs to be
highly simpliied. Most existing exemptions should be withdrawn except perhaps
those on long term saings, which should also be reiewed. 1oday pension income
is taxable but lump sum withdrawals rom Proident lunds are not. 1he Committee
is o the iew that all premature withdrawals as well as the terminal accumulations
withdrawn as a lump sum rom Proident lunds should be taxable at the rate o
long term capital gains rate. Howeer the amount which is used or buying annuities
should be tax-ree.
,d, 1he income earned on lunds held in trust by PlM`s and annuity proiders, on
behal o contributors, should be exempt rom any taxes. 1his does not imply that
PlM`s and Annuity Proiders are 100 tax ree entities. It only implies that income
on their pension related assets should be exempted rom tax.
,e, Also income on Proident lunds should be made Income 1ax ree - without any
ceiling on the tax-ree rate o return.
3.6 Micro-credit and Withdrawals
,a, 1he basic principle o pension saing is that contributions should be inaccessible to
the indiidual until retirement. Howeer, in India, most indiiduals hae ,a, highly
ariable incomes, and ,b, highly limited access to ormal credit. In this situation, an
indiidual may be uncomortable with being preented rom haing access to his
accumulations in his retirement account in the ace o a practical exigency -
especially in the absence o any other credit acility.
,b, Hence, there is a strong case or integrating a micro-credit acility into the pension
system whereby indiiduals can hae access to unds in the orm o a loan against
their pension saings. Bank branches can disburse these loans. 1he rules used here
should be as ollows:
31
Loans o up to Rs.5,000 should be aailable proided the indiidual pension account
has a balance in excess o Rs.10,000. 1he loan should be collateralised against the
pension assets
Once the loan has been undertaken, all subsequent retirement contributions should irst
be allocated towards repaying the loan.
1he minimum annual pension contribution o Rs.500 per year should be applicable oer
and aboe loan repayments,
Only one loan can be operatie at a time
,c, 1hese limits ,Rs.5,000 and Rs.10,000, should be periodically reised to keep pace
with inlation. 1he implementers o the pension system should design the detailed
modalities o how this micro-credit acility would work.
,d, 1he Committee also debated at length whether indiiduals should be permitted to
withdraw a part o their accumulations beyond this micro-credit acility beore
retirement. \hile the general consensus is that withdrawals should be discouraged
except in cases o desering premature retirements, a complete ban on withdrawals
may deter many indiiduals rom participating in the system. 1hereore, the
Committee recommends that premature withdrawals should be permitted once an
indiidual accumulates Rs.2,00,000 in the IRA. 1his limit should be periodically
reised upwards in keeping with inlation. Such withdrawals will howeer be allowed
only thrice in the entire period o accumulation. A maximum o 33 o the
accumulated balance aboe Rs.2,00,000 shall be permitted to be withdrawn. All such
premature withdrawals will be subjected to a withdrawal tax o 10. \ithdrawals
shall be allowed only or housing, medical expenses or serious illness or other
grounds speciied by the Indian Pensions Authority.
3.7 Lstimated Costs
,a, It is commonly obsered that an increase in the rate o return by one percentage
point oer a lietime o accumulations increases the terminal wealth o a pension
accumulation program by oer 20. By that same argument, a reduction in
administratie ees and expenses o one percentage point would hae the identical
eect, since all ees and expenses o the pension system are ,ultimately, borne by
32
participants. Hence, an important perspectie in pension system design is that o
trying to obtain the lowest possible ees and expenses. International experiences
hae suggested that this is a nontriial problem. 1he Indian experience with the
LPlO also reeals large costs that are borne by participants.
,b, Many eatures o the design proposed in this report hae been tailored towards
minimising the burden o ees and expenses upon pension system participants. 1he
centralisation o record-keeping and collection o contributions by the depository is
a powerul tool or reducing costs, many pension systems abroad which began as
decentralised systems are now moing towards the depository structure which is
proposed in this report. linally, the accent on modern I1 and telecommunications is
a powerul tool or reducing costs, as has been proen by the computerization
experience with money orders in the postal system.
,c, 1he Committee has made preliminary estimates o the costs aced in the depository,
transactions at the POPs, ees and expenses in und management and the IPA. \e
ind that under Indian conditions, it is possible to achiee all these unctions using a
total charge o 0.25 o pension assets per year.
,d, A total expenditure o 0.25 would be one o the lowest leels o costs when
compared with indiidual account systems elsewhere in the world. 1he impact o
these costs on pension wealth accumulation can be measured using a simulation.
Assume a contribution rate that begins at Rs.5 per day. Assume wage growth o 3
per capita and a real rate o return on pension inestment o 6 per year. 1hen the
inal pension assets proe to be Rs.3,14,1 i transactions costs are ignored, and
Rs.2,88,589 i transactions costs are paid or. Hence, transactions costs worsen the
inal accumulation by a actor o 8.8
8
. 1his simulation is the most conseratie
case since it ocuses on a low contribution rate o Rs.5 per day. 1he impact o costs
and ees would be below 8.8 o the terminal wealth or contribution rates aboe
Rs.5 per day.

8
Indiidual account pension systems without a depository are known to be highly expensie in terms o
transactions costs. One estimate or UK ,Mamta Murthi, J. Michael Orszag and Peter Orszag, 1999, reports
that the typical accumulation ratio in UK is 25, i.e. the inal pension assets are 25 lower than what they
would be in a world without transactions costs.
33
4 Regulatory Iramework
1he Indian Pensions Authority ,IPA, is a new Regulatory Agency, which is required in
order to perorm a ariety o important roles in the institutional arrangements o the
pension sector. 1he primary roles o IPA are:
,a, Oersight o unctioning and growth o all aspects o India's pension sector.
,b, Lnorcement o mandatory contributions in the organised sector.
,c, Registration o the Depository, POPs, PlMs, Annuity Proiders and Indiidual
Retirement Adisors.
,d, Prescription o inestment guidelines and accounting standards or PlMs.
,e, Superision and rules or micro-credit, premature withdrawals and taxation
,, Lnorcement against raud, dispute resolution and redressal.
,g, Implementation o the relatie return guarantee, including risk management to
ensure adequacy o collateral.
,h, Adocacy and education about the pension sector amongst citizens and policy
makers.
,i, Standardisation o inormation about und perormance and dissemination o easily
comprehended perormance measures about all PlMs to all indiiduals.
,j, Research about India's pension system, and ealuation o policy initiaties that could
yield improed unctioning.
4.J Oversight of Iunctioning and Growth
1he core unction o IPA is to oersee and superise the unctioning o the pension
system, resole problems and make incremental improements on an ongoing basis, and
to lead the growth o ormal arrangements or post-retirement consumption by indiiduals
in India.
34
4.2 Intermediaries
1he pension system isualised here is comprised o our classes o intermediaries: the
POP, the PlM, the depository and the annuity proider. 1he IPA would deine the entry
criteria or these intermediaries. 1hese may initially be as ollows:
POP: Banks with a net worth aboe Rs.500 million who hae scored 'C' or better on the
CAMLL rating, Post oices, depository participant oices which hae realtime connectiity to
the depository and hae a clean record in enorcement and inspections in the last three years
PIM: 1his is discussed in Section 4.3
Depository: Lither or both o existing Depositories in India, or their subsidiaries, or a new
depository promoted by the PlMs or their sponsors
Annuity Provider: Banks or PlMs, which satisy the aboe conditions, can become annuity
proiders. In addition, insurance companies authorised to be in lie insurance by the IRDA
and domestic inancial institutions would also be permitted to sell annuities.
4.3 Lntry of PIMs
Competition between priate und managers is widely iewed as a highly desirable eature
o the pension sector. Howeer, certain problems hae been experienced in other
countries:
Owing to the low power o statistical tests o und manager perormance, een highly
skilled workers are seldom able to correctly choose und managers based on past
perormance. lund managers who did well in the recent years do not necessarily
outperorm in coming years.
Most workers are not comortable with understanding and analysing perormance, ees,
loads and expenses. Indiidual account systems with multiple competing und managers
tend to hae excessie ees, and tend to hae pension unds expending enormous
resources on sales and collection ,which are passed on to workers as expenses,.
A plethora o und managers increases the complexity o the inormation processing that
workers hae to do. Our proposal or standardising all unds into three styles, thus
35
reducing the complexity o controlling or dierences in risk, does not adequately ensure
that it will be easy or workers to choose better und managers.
1he problem o enorcement and preention o raud is harder with a large number o
pension und managers.
1hese concerns can be addressed using a system as ollows:
1here should be six PlMs, to begin with.
Lach PlM should run three schemes, one in each style.
1he choice o the six PlMs should be based on an auction, where interested und
managers would compete in bidding the lowest management ees ,inclusie o all
expenses,. 1he bidders with the six lowest ees ,inclusie o all expenses, would get the
PlM license or a period o ie years. 1here would be no license ees`, the auction
process would not generate reenues or the Goernment.
All SLBI registered mutual unds with a net worth aboe Rs.250 million or their sponsors
would be eligible to participate in this bidding. \inning PlMs should commit to obtaining
atleast Rs.10 billion o assets within two years
9
.
PlMs would need to be distinct entities exclusiely doing pension asset management.
Lery ie years, this bidding would take place aresh.
Auctioning based on ees-expenses ensures that indiiduals obtain low ees and expenses.
Up-ront setting o ees and expenses eliminates the constant monitoring that indiiduals
hae to do about expenses, and the possibility o large marketing expenses being passed
on to participants.
Once a PlM has obtained one o the six slots, it does not ensure that it would obtain
assets or management, the PlM would hae to show good perormance in order to
attract assets. 1he control on sales and marketing expenses implies that PlMs would be
orced to hae a greater reliance on perormance as a way to attract assets. 1he resh
auction eery ie years gies opportunities or relatiely ineicient PlMs ,who hae lower

9
I a PlM ails to achiee this target, his ees should be dropped by 20 rom the third year.
36
assets under management and are likely to bid higher ees - expenses, to be replaced by
others
10
.
4.4 Lnforcement
1he proposed system inoles indiiduals and our classes o intermediaries - the POP,
depository, PlMs and the annuity proiders. Lach o these inoles a potential or raud
and requires enorcement.
POPs could deraud indiidual account holders when unds are paid into the system or
withdrawn. Sometimes, the wealth o a worker could be switched rom one PlM to
another in the absence o adequate authority.
PlMs could indulge in a ariety o malpractices, including iolation o inestment
guidelines, ront-running, use o trading mechanisms which are not in the best interests o
indiiduals, market manipulation, etc.
IPA would need enorcement machinery that imposes penalties upon errant economic
agents, and eole the regulatory ramework on an ongoing basis to aoid a recurrence o
these lapses.
IPA would hae a window where any indiidual in the country would be able to obtain
redressal o grieances in the context o pension intermediaries ,POPs, PlMs, Depository
or Annuity Proiders,.
linally, the relationship between annuity proiders and indiiduals could present a ariety
o problems. Howeer, these would appropriately come under the jurisdiction o the
Insurance Regulatory and Deelopment Authority ,IRDA,.

10
It is possible to design a graceul handoer o assets o exiting PlMs as ollows. Suppose an inestor has
Rs.120 inested in the Sae Income` style and Rs.240 inested in the Balanced Income` style associated
with PlM A` who exits rom the system ater an auction. 1he depository would transer these assets as
ollows: Rs.120 would be handed to the suriing PlM who has the highest perormance in the Sae
Income` style in the preceding one year, and Rs.240 would be handed to the suriing PlM who has the
highest perormance in the Balanced Income` style in the preceding one year. 1hese transers would take
place at no cost to the participant. lurther, the irst time the participant chooses to modiy his allocation in
response to something that is closer to his preerences, away rom this deault reallocation, he would be
exempted rom the exit load.
37
4.S Relative Return Guarantee
IPA would monitor the calculations and transers o unds associated with the relatie
returns guarantee that is recommended aboe or the six schemes under the Sae
Income` style. In addition, IPA would ensure that PlMs maintain adequate collateral to
support these transers. 1his would require daily marking to market, and risk management,
in a manner which is not unlike the risk management o the clearing corporation. I a und
has inadequate collateral, IPA would takeoer the assets o the und, remoe the PlM
rom the system, and assign the indiiduals to other PlMs.
PlMs would hae to maintain adequate collateral with IPA in order to ensure solency in
the eent o under perormance. 1he assets that a PlM can be saely allowed to manage
would obiously need to be linked to the size o the collateral maintained. 1he Committee
recommends that no PlM should enter the system with collateral below Rs.100 million.
Under normal circumstances, the relatie returns guarantee is attainable through risk
management by IPA. Howeer, in the eent o a crisis where the collateral pledged by
PlMs is unable to cope with the payments which hae to be made, there should be a
guarantee rom the Central Goernment that these would be made using Goernment
assistance. 1his would impose a contingent liability on the State.
4.6 Advocacy and Lducation
IPA would be charged with the role o perorming adocacy or the idea o saing or
retirement. It would need to educate workers around the country about how the system
works, about the choices between the three styles, and how workers can eectiely choose
und managers.
1he choices that workers ace, in the context o pension planning, are numerous and
challenging. \hich PlM to choose \hich style to choose How much to annuitise I a
worker ticks on the deault` allocation, the results may not be closely in line with his own
tastes and goals. lor hundreds o millions o workers in India to make independent
choices on these questions requires a sea change in standards o literacy on inancial
matters.
38
4.7 Information Standardisation and Dissemination
IPA would require copious inormation disclosure by PlMs on a daily basis. IPA would
work toward maximising the comparability o perormance statistics across the PlMs.
All this inormation would be summarised in a simple and highly comprehensible manner.
IPA would disseminate a VLPSOH one-page table o a perormance comparison between all
unds in the widest possible manner so that indiiduals can use this inormation to choose
PlMs in an inormed manner. lor example, IPA could release the perormance data in a
quarter-page adertisement in all major newspapers, once a month. 1he education
unction o IPA would include the task o ensuring that indiiduals can understand this
report.
4.8 Research
IPA would conduct or sponsor a research program about India's pension system.
4.9 Organisational Issues
IPA is a regulatory agency. 1he challenges that it will ace in regulation and enorcement
are much like those aced by other regulatory agencies in India.
IPA should be an autonomous Goernment body. IPA should be located in Bombay.
A Board comprised entirely o proessionals should goern the IPA. Only indiiduals
with a track record o excellence in releant areas o expertise should be appointed on
the Board.
IPA should be interconnected with the rest o the pension sector using computer
networking. 1his would reduce the cost o operations, improe ongoing data capture,
and enable proactie regulation without always requiring a physical inspection.
lees charged to indiiduals who hae accounts in the pension system would und the
IPA.
39
S Reforms to Lxisting Provisions
1he prime ocus o the Committee has been on the great mass o indiiduals who are
working outside the pension proisions that presently exist in the unorganised sector.
Howeer, there is a unity in the basic insights into designing pension systems. An
examination o India's pension system in totality reeals serious laws in existing
proisions or the organised sector. 1he indiidual retirement accounts ,IRAs, described
aboe can be an important part o the reorms agenda in the organised sector as well.
S.J Reforms to Lmployees' Provident Iund
1he laws o LPl hae been well documented: ,a, ineicient asset management with low
rates o return, ,b, poor customer serice, ,c, a highly permissie approach towards
premature withdrawals. 1his criticism is succinctly expressed in one act: the aerage assets
o indiiduals leaing the Pl system is the tiny sum o Rs.25,000. In this sense, Pl is
ailing on the core goal o accumulating pension saings or participants.
1he Committee has the ollowing recommendations on how these problems can be
addressed:
,a, Premature withdrawals should only be permitted in the eent o permanent disability
or death. Apart rom this, premature withdrawal should entail mandatory
annuitisation o the balance withdrawn.
,b, Participants in LPl should be gien the choice o haing their contributions
directed into the indiidual account system recommended in this report.
,c, 1he existing notion o exempt unds` is subsumed by the indiidual account
system recommended in this report. Companies which are presently managing
exempt unds` should cease to manage these unds. 1hey should gie their
employees the choice o 18 schemes where their mandated contributions would be
deposited into an indiidual account.
40
S.2 Reforms to Lmployees' Pension Scheme J99S
1he concerns about the LPS 1995 product may be summarised as ollows:
,a, 1he und management that is presently in use with LPS 1995 is ineicient. Using
superior und management, participants could obtain much higher beneits at the
same leel o contributions.
,b, 1here are persistent concerns about the extent to which the beneits that are
promised by LPS 1995 are in line with the contribution rate required. 1here are also
questions about the extent to which uture beneits are inlation indexed. 1he ear is
that the present LPS is grossly underunded.
,c, 1he Goernment presently contributes 1.16 towards pension accruals. 1his
subsidy has no reason to exist.
,d, 1he contribution rates and beneits or arious establishments participating in LPS
1995 or similar pension plans ,e.g. by nationalised banks, are dierent.
Hence, the Committee recommends the ollowing actions:
,a, LPS 1995 should standardise on a single set o beneits or all establishments, based
on an employer contribution rate o 10.
,b, 1he Goernment's contribution o 1.16 towards pension accruals should be
withdrawn.
,c, 1he unds o LPS 1995 should be proessionally managed.
,d, 1he inestment guidelines should be amended on the lines shown in this report.
,e, Lery year, an actuarial ealuation o LPS 1995 should be conducted, and the report
should be publicly released. Beneits and,or contributions should be adjusted so as
to ensure that LPS 1995 makes no claims on the Goernment, now or in the uture.
,, Presently, the LPlO is charged with both und management and annuity proision.
1here may be an important case or conerting lumpsum assets into a monthly
pension using the annuity market, once greater competition in the annuity market
has appeared. Once this is done, the LPS 1995 should be based on outsourced asset
41
management ,implemented by proessional und managers, and outsourced beneits
,implemented by proessional annuity proiders,.
S.3 Reforms to Public Provident Iund
1he PPl scheme originated out o the desire to improe old age preparation in the
unorganised sector. Howeer, the existing PPl scheme has numerous well-documented
laws. \e will reer to the existing PPl as the PPl-1 scheme, and recommend the creation
o a new PPl-2 scheme as ollows:
,a, All resh contributions into PPl-1 should cease, though PPl-1 should continue to
meet all obligations or the uture as originally promised to existing participants.
,b, A new PPl-2 scheme should be announced, which accepts resh contributions.
,c, \ithdrawals rom PPl-2 should only be permitted at age 60, or in the eent o
death or permanent disability.
,d, PPl-2 should be de-linked rom small saings instruments. It should be
proessionally managed by an independent Board o 1rustees. 1he unds that come
into PPl-2 should not go into the public account. 1he entire assets o PPl-2 should
be explicitly isible as securities held with a proessional custodian.
,e, In order to help obtain a transition out o existing transer patterns, the inestment
guidelines o PPl-2 may stipulate that 40 o the assets be inested in State
Goernment Securities.
,, 1he inestment guidelines should be liberalised under the direction o the
independent board o trustees - which will establish sound asset management
policies and select proessional und managers to implement these policies, subject
to the transitional qualiication requiring a 40 allocation to State Goernment
Securities.
,g, 1he rates o return that PPl-2 comes out with should be drien purely by the
inestment return obtained by its und managers, the Goernment should hae no
role in inluencing the rate o return reported.
42
S.4 Government Pension Scheme
It is important that Central Goernment and State Goernment employees are coered by
a pension proision that proides signiicant income security during old age. \hile the
Committee does not hae adequate inormation regarding the unding o this proision, it
appears that this proision is not ully unded and could pose a serious problem. In light
o increasing longeity in India, and possible decline in number o Goernment
employees, this proision can impose a serious strain on uture Goernment inances. 1he
Goernment is seized o this problem and the Ministry o linance has appointed a
\orking Group to look into the unding aspect o Goernment Pensions.
1he Committee would only recommend that measures should be taken so that
Goernment Pension liabilities become ully unded out o contributions made by
employees. 1his goal can be achieed oer a period o the next ten years.
S.S National Senior Citizen's Iund
,a, 1here is growing awareness and concern about the case o elderly persons in society.
I at all, the problem is expected to worsen in the uture i timely measures are not
taken in the present. 1his should be a concern o all indiiduals, priate sector
companies, as well as the Goernment. 1he Goernment should take a lead in
galanising all these eorts. 1owards this end, it is proposed that a National Senior
Citizen's lund be set up to encourage, catalyse, and complement all priate sector
eorts or the betterment o lie o senior citizens in the country. 1he lund can also
be utilised or educating indiiduals about arious security schemes, conducting
research into areas concerning senior citizens and building inrastructure releant to
the social security industry.
,b, 1he present contribution o 1.16 o wages by the Goernment to the Lmployees`
Pension Scheme should discontinued. Instead, this contribution should be
channeled into the National Senior Citizen`s lund as initial corpus or the irst 3
years o incorporation o this lund. 1hereater, this contribution should be
discontinued. In addition, 25 o the premature and lump sum withdrawal tax on
proident unds under the new IRA system should be transerred to this lund
annually.
43
,c, 1he und should be monitored and administered by a proessional Board o
1rustees appointed by the Ministry o Social Justice and Lmpowerment.
S.6 Caring for 1oday's Old
,a, 1here is a large existing population o destitute elderly - in the age group o 60 plus.
1here are no easy answers to proiding them with income security gien the
inancial position o Goernment and the large size o this population. At the same
time gien the signiicant magnitude o the problem, this issue cannot be ignored
either.
,b, Since August 1995, the Goernment o India is operating the National Social
Assistance Program or the beneit o destitute persons aged aboe 65 years. 1here
are three schemes under the program, one o which is National Old Age Pension
Scheme. Under the scheme, a pension o Rs.5 a month is proided to eligible
persons. States also operate similar schemes and supplement the Central
Goernment. In the irst two years the central Goernment disbursed about Rs.4
billion under the National Old Age Pension Scheme. 1he amounts could be large, i
enough publicity is gien to the scheme and eligible persons turn up to take the
beneit o the scheme.
,c, 1hough no inormation on the percentage o destitute among the elderly is aailable,
estimates suggest that on the basis o current criteria, Central Goernment
disbursement on this account are unlikely to exceed Rs.10 billion. lurther, as the
percentage o population below poerty line declines oer time, this igure should
gradually reduce.
,d, 1he Committee is o the opinion that National Old Age Pension Scheme plays an
important role despite its limitations, and it should be continued.
44
6 Implementation Path
1he sequence o actions that would lead to an eicient implementation o the pension
system proposed in this report would run as ollows:
,a, Lstablishment o the Indian Pensions Authority.
,b, Deelopment o a detailed blueprint o the processes in the pension system and how
they would be implemented by arious participating agencies ,including banks, the
postal system, etc,.
,c, Commencement o education eort.
,d, Lstablishment o the depository. 1his can harness the institution building that has
already taken place in India in this area.
,e, Registration o POPs, the SRO or Retirement Adisors, and the PlM auction.
,, lull I1 integration between IPA, Depository, POPs, PlMs and IRAs, and a detailed
testing o this integration.
,g, Commencement o the system.
,h, Lscalation o education eort, inolement o NGOs in education eort, pooling o
contributions through employers or NGOs.
1he capital expenditures inoled here are airly small. \hen the National Securities
Depository ,NSDL, was created in 1996, the initial capital was Rs.1.0 billion.
1he Department o Posts has estimated that the incremental costs or technology and
telecommunications at each post oice, or implementation o computer and telecom
technology, amount to Rs.80,000. Hence, i a post oice needs to be hooked up into the
pension system or high quality serices, and een i the entire cost has to be borne by the
pension system, the cost works out to Rs.80 million or each 1,000 post oices.
Once these systems are in place, the pension system described in this report is entirely sel-
supporting. 1he administratie and operational costs o the pension system are coered
using the user charges paid to the depository, the regulator, the POP and the PlM. Hence,
apart rom the startup expenses, this system makes no direct claims on Goernment
inances.
45
1his report does, howeer, ask or two contingent liabilities upon the Goernment:
,a, A second-tier saety net in case the IPA is unable to implement the relatie returns
guarantee using collateral rom the PlMs, and
,b, A second-tier saety net or the contribution protection insurance to the extent that the
guarantee cannot be implemented through insurance companies ,Section 3.2.4,.
46
Glossary
$QQXLW\ 1here are arious types o annuity schemes, with possible beneits to
suriing spouse ater death.
%HQHILWV 1he income ,or lump-sum, that indiiduals obtain out o the pension
account upon retirement.
&RQWULEXWLRQV1he unds that indiiduals pay into a pension account.
&RQWULEXWLRQ5DWH1he raction o income that an indiidual submits into the pension
account eery year. Lxample: i a person earns Rs.20,000 per year and contributes
Rs.2,000 into the pension account, this is a contribution rate o 10.
(TXLW\3UHPLXP1he ULVNSUHPLXP associated with inestment in the equity index
und.
([LW/RDG1he ee charged by a scheme when an indiidual chooses to moe unds
out o the scheme. An exit load o 0.5 means that when Rs.1,000 is remoed rom
the scheme, there is a ee o Rs.5, so that only Rs.995 are actually moed out.
,QIODWLRQLQGH[HG$QQXLW\An annuity where the beneits are indexed to inlation.
1his would be a contract which pays Rs.1 per month rom today until death, but the
beneit ,Rs.1,month, grows oer time with inlation. Obiously, inlation--indexed
annuities would be much more expensie than ordinary, unindexed annuities. See
DQQXLW\.
3ROLWLFDO5LVN1he risk o malunction in a pension system that deries rom political
pressures on the pension system.
3RUWDELOLW\ 1he eature o a pension system which allows uninterrupted contributions
despite mobility o an indiidual across jobs, and mobility o the pension assets in an
indiidual account across und managers upon request o the indiidual.
5LVNSUHPLXP1he enhanced rate o return that is obtained by inesting in risk
bearing securities. I the return on risk ree long dated securities is ,say, 12 percent,
and long term on equity inestment is 18 percent, the risk premium is 6 percent.
47
Indiiduals who bear the luctuations o inesting in the equity index in India earn a
long-run aerage risk premium o about 10 percentage points per year as a reward: i.e.,
the long--run aerage rate o return on the index und in India is 10 percentage points
higher than inestments in Goernment securities. See HTXLW\SUHPLXP.
9DULDEOHDQQXLW\An annuity where the monthly beneit aries with asset returns.
48
Acknowledgements
/DWH56.DXVKLN, who was Central Proident lund Commissioner, made an inaluable
contribution as member o the committee until his untimely death. He combined a
complete knowledge about India`s existing pension system with a great zeal to think about
it rom a resh perspectie.
7KH3URMHFW2$6,6([SHUW&RPPLWWHH which has prepared the inal Report includes
S.A. Dae ,Chairman,, Dharmendra Deo ,Ministry o Social Justice and Lmpowerment,,
C.S. Rao ,Ministry o linance,, Ajay Shah ,IGIDR,, Nalin 1hakor, Atul Chaturedi
,Ministry o Social Justice and Lmpowerment,, and Gautam Bhardwaj ,Inest India
Lconomic loundation,.
,QYHVW,QGLD(FRQRPLF)RXQGDWLRQ,IILl, was appointed consultant to the Ministry o
Social Justice and Lmpowerment or Project OASIS. IILl also sered as the Secretariat
and anchor` o Project OASIS and was the central point o reerence or all the actiities,
they supplied the enthusiasm that always kept the Project moing.
,QSXWVDQGLGHDV about pension system design, eedback on proposed design alternaties,
knowledge about existing pension and related inrastructure in India, and access to
international experiences were receied rom A.P. Singh ,Ministry o Communications,,
Anand Bordia ,UNDCP,, Asha Das ,Ministry o Social Justice and Lmpowerment,,
Lstelle James ,1he \orld Bank,, Lerette James ,OLCD,, Madan Pania ,Ministry o
Communications,, Mukul Asher ,Uniersity o Singapore,
Funding Sources and Support
Industrial Deelopment Bank o India, ICICI Limited, Unit 1rust o India, Lie Insurance
Corporation o India, IlCI Limited and 1he Stock Lxchange, Mumbai jointly unded
Project OASIS. IDBI and IGIDR hosted some o the Project OASIS Committee
meetings.
49
Sponsored research
Research Papers or Project OASIS were produced by Ajit Ranade ,ICRILR,, Alberto
Musalem ,1he \orld Bank,, Ashok \adhwa ,Ambit Corporate linance,, Basudeb Sen
,U1I,, Brian Arrighi ,Prudential Insurance,, John Bowman ,CGU,, Nageshwar Rao ,IDBI
Capital Markets,, Nalin 1hakor, Nihal Kothari ,Hindustan Leer,, P.C. Gupta ,LIC,,
Prain Visaria ,ILG,, R.S. Kaushik ,LPlO,, Robert Palacios ,1he \orld Bank,, S.N.
Mathur ,AI1D,, Sanjay Sachde ,Principal linancial Group,, Sudha Pilla ,Ministry o
Rural Areas and Lmployment,, Susan 1homas ,IGIDR,
Consultations
Project OASIS receied eedback rom experts in a set o three consultations:
1. 1he consultation at Goa ,Noember 2-29, 1998, was attended by Ajay Sriniasan
,Prudential ICICI AMC,, Ajit Ranade ,ICRILR,, Alberto Musalem ,1he \orld Bank,,
Ashok Lahiri ,National Institute o Public linance & Policy,, Ashok V. Desai
,Business Standard,, B.K. Chaturedi ,Ministry o linance,, Basudeb Sen ,Unit 1rust
o India,, C.B. Bhae ,National Securities Depository Limited,, Luan Macdonald
,HSBC,, Girija Pande ,ANZ Grindlays Bank,, Hemant Sahai ,J. Sagar Associates,, Juan
Costain ,1he \orld Bank,, Kalpana Morparia ,ICICI Limited,, Late Mr. R.S. Kaushik
,Central Proident lund Commissioner,, M. Vijayanunni ,Registrar General & Census
Commissioner - India,, M.K. 1andon ,General Insurance Corporation o India,, G.
Krishnamurthy ,Lie Insurance Corporation o India,, Nageshwar Rao ,IDBI Capital
Markets,, P.C. Gupta ,Lie Insurance Corporation o India,, P.M. Bhujang
,Harkishondas N. Hospital,, Prain Visaria ,Institute o Lconomic Growth,, Preeta
Misra ,Inest India Lconomic loundation,, Prithi Haldea ,PRIML Data Base,, R.H.
Patil ,National Stock Lxchange o India,, Richard Oerton ,I1C 1hreadneedle,,
Robert Palacios ,1he \orld Bank,, S.H. Bhojani ,ICICI Limited,, Sanjay Sachde
,Principal linancial Group,, Sudha Pillai ,Ministry o Rural Areas & Lmployment,,
Susan 1homas ,IGIDR,, 1.S. Laschar ,Ministry o linance,, 1im Beardsall ,CGU,,
Vinod Kumar ,\.H.O. Lxpert Adisory Panel,, \.H. Malegam ,S.B. Billimoria & Co.,,
\onne Sin ,1he \orld Bank,
2. 1he consultation in Mumbai ,06 October 1999, was attended by Ajay Kaul ,Alliance
Capital,, Asha Das ,Ministry o Social Justice & Lmpowerment,, Brian Arrighi
50
,Prudential Insurance,, C.R. Karode ,Mahindra & Mahindra,, D.R. Mehta ,Securities
and Lxchange Board o India,, Luan Macdonald ,HSBC Securities,, G. Krishnamurthy
,Lie Insurance Corporation o India,, G.P. Gupta ,Industrial Deelopment Bank o
India,, Girija Pande ,ANZ Grindlays Bank,, Juan \ermo ,OLCD \orking Party on
Priate Pensions,, N. Nagarajan ,Resere Bank o India,, Nageshwar Rao ,IDBI
Capital Markets Limited,, Nihal Kothari ,Hindustan Leer Limited,, P.C. Gupta ,Lie
Insurance Corporation o India,, Prithi Haldea ,PRIML Database,, Priya Shaikh
,Inest India Lconomic loundation,, R. Raimohan ,CRISIL,, R.H. Patil ,National
Stock Lxchange o India,, Rajendra P. Chitale ,M.P. Chitale & Co.,, Raji Vij
,1empleton AMC,, Susan 1homas ,IGIDR,, Urjit Patel ,Inrastructure Deelopment
linance Company,, \.V. Reddy ,Resere Bank o India,
3. 1he consultation in Delhi ,14 October 1999, was attended by Ajay Mahal ,NCALR,,
Anand Bordia ,UNDCP,, Aodiiti Mehtta ,Prime Minister`s Oice,, Asha Das
,Ministry o Social Justice and Lmpowerment,, Ashok K. Jha ,USAID,, Dao Minh Le
,U.S. Lmbassy,, Dei Dayal ,Ministry o linance,, G. Krishnamurthy ,Lie Insurance
Corporation o India,, Jaimini Bhagwati ,Ministry o linance,, N. Rangachary
,Insurance Regulatory Deelopment Authority,, P.C. Gupta ,Lie Insurance
Corporation o India,, Peter 1hormann ,USAID,, Richard Hinz ,U.S. Department o
Labour,, S. Kuppuswami ,Unit 1rust o India,, S.C. Pandey ,Ministry o linance,, S.N.
Mathur ,AI1D,, Sandeep Asthana ,Unit 1rust o India,, Sudha Pillai ,Ministry o Rural
Areas and Lmployment,, Surjit S. Bhalla ,Oxus Inestments and Research,, 1im
Beardsall ,CGU,

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