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Tuesday, November 15, 2011

India Pension System : one of the weakest in the world.

"20 nations with the WEAKEST pension systems"

November 10, 2011 From Rediff Business Website. 

"Pension is a regular (normally monthly) payment that a person gets when he/she has retired from a job. This regular payment is obtained from an investment fund to which that person, or his/her employer, contributed during the time the person was working.

At a time when you are no longer young enough to work, it is the pension that comes to your aid.

People working in the organised sector, and their employers, contribute to the Provident Fund (which is effectively a retirement fund). Upon a person's retirement, he/she gets the entire sum at one go which can then be used to invest in a scheme that gives monthly income or to build a house or finance a child's wedding or education, etc.

In India, the Pension Fund Regulatory and Development Authority is the prudential regulator for the New Pension Scheme. This scheme promises regular income based on the amount of money you invest in it during the time you are earning.

So which are the nations with the world's weakest pension systems currently?

1. Greece
Greece is home to the weakest national pension system in the world, according to the Allianz Global Investors Pension Sustainability Index.
The index monitors the sustainability of national pension systems in 44 nations across the globe.
Greece, already facing bankruptcy, has an almost unsustainable level of sovereign debt, poor pension take-up, early retirement age and thus an ever increasing number of pensioners that has skewed its economy against the productive/working population.

In other words, Greece has far many more pensioners than working people. The results of this study show Greece to be in the greatest need for reform.

Not only does Greece have the worst ranking within Europe, it yields the highest score of all the countries considered in this study.
At the heart of Greece's deteriorating ranking are acute sovereign debt, a quite serious aging problem and a still generous pension system, despite pension reforms initiated as a condition of IMF and ECB financing initiatives.

2. India
India has the second weakest pension system in the world.
The Pension Sustainability Index systematically examines relevant elements of pension systems in order to measure and evaluate the pressure on governments to reform their national pension systems.

India is under the most reform pressure. Extremely low pension coverage in the country remains the primary challenge to India's pension policy.
Adequate steps have yet to be implemented to see to it that pension coverage increases in India.

Only 12 per cent of the enormous Indian population of 1.21 billion is covered by any type of formal pension arrangement at all.

3. China
In China, like India, only about 12 per cent of the population contributes to a pension. China ranks third in terms of weakness in pension system.
The ratio of pensioners aged 65 and older to population aged 15-64 years is expected to top 40 per cent in China by 2050.
Comprehensive pension systems remain the exception rather than the rule across Asia, Allianz GI said.

4. Thailand
Thailand has the world's fourth weakest pension system. The weaknesses of Thailand's pension system are compounded by an average retirement age of 55 years, compared with 65 years in most western European countries.
Like in China, the ratio of pensioners to the younger population is estimated to be over 40 per cent in by 2050.

5. Japan
Among the Asian countries, Japan ranks fourth -- despite good pension coverage.
Japan is suffering from one of the highest old-age dependency ratios in the world. By 2050, it is expected to increase to an unsustainable level of almost 70 per cent, compared to 42 per cent in China.
Another factor influencing Japan's unfavourable ranking is its high sovereign debt, which leaves no room for subsidizing the pension system should it become necessary.
Japan has the world's fifth weakest pension system."





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