The Narendra Modi led NDA-government, in its last budget for its term, has announced a mammoth pension plan for the unorganised sector, called the Pradhan Mantri Shram-Yogi Maandhan Mega Pension Yojana” (PMSYM), which Finance Minister Piyush Goyal dubbed it as the mega pension yojana in his Budget speech on Friday. At the moment, only sketchy and bare minimum details have been made available, and while we wait for further clarification on the scheme, it will be instructive to do a quick recap of the erstwhile, and the still continuing pension scheme for the unorganised sector, the Atal Pension Yojana (APY), and what to look out for in the PMSYM.
- Age restriction: The APY was largely criticised for its restrictive age requirements of 18 to 40 years, for contributing to the scheme. So far, it seems like the age bracket has been revised to 18-60 yrs in the PMSYM, but there is no clarity on how long the co-contribution by the government will be for. In the APY, the government’s co-contribution was limited to five years (2015-16 to 2019-20). In the PMSYM, the government has announced co-contribution, and it will be interesting to see if this is made perpetual.
- Mandatory bank account: Another criticism of the APY was its mandatory requirement of having a bank account. In the PMSYM, the government has decided to roll out pensions to the unorganised sector, through the Jan Dhan Yojana. A fundamental issue then, and even now, remains the cost of entry into this scheme, namely, a mandatory bank account. However, it is heartening to see that the focus of the Jan Dhan has finally been shifted from the ‘household’, to the ‘individual’. This is a much-needed reform for making financial inclusion more gendered.
- Aadhaar: The APY form made Aadhaar compulsory in 2017. Not only was Aadhaar made compulsory for the subscriber, but also for the spouse of the subscriber, if married. In spite of the Supreme Court judgment on Aadhaar in 2018, which made Aadhaar non-mandatory for services such as banking and telephony, the pensions regulator specifically requested UIDAI to allow Aadhaar seeding, despite clear evidence on the exclusionary features of compulsory Aadhaar linkage to social benefit schemes like ration, and pensions.
- Harmonisation of schemes: The PMSYM is supposed to run concurrently with the APY. There has been no clarity provided as to why there are two national level pension schemes running simultaneously for the same target audience, with a waste of regulatory resources, and coordination problems, not to mention confusion amongst subscribers. India already has a plethora of various social security legislations, schemes, both at the Union, and the state level, causing a colossal waste of resources, and resulting regulatory arbitrage. In 2018, sixty economists had written to the government urging it to universalise social security pensions for the elderly, single women and persons with disabilities with the Union contribution pegged at Rs 500 per person per month. It will be interesting to see if the PMSYM can be eventually converted into a larger, all-encompassing social security programme.
- NALSA: The APY is also violative of the NALSA judgment for providing a gender binary form, that is, options of only ‘male’ and ‘female’. It is hoped that the PMSYM will allow for a third gender category in the form. NALSA expands to National Legal Services Authority.
- Penalty: Lastly, while details on penalties for the exit, delay in paying monthly contributions, or inability to pay contributions for certain months is awaited, it is hoped, that unlike the APY which levied heavy penalties for all of these, the PMSYM takes a more empathetic route to nudge savings.
The author is a Delhi-based policy lawyer
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Updated Date: Feb 02, 2019 12:06:59 IST