LIC to Manage Govt.'s pension plan for unorganised sector workers

The United Progressive Alliance government is set to roll out yet another social security plan -- Swavalamban -- that will provide lifelong pension of at least Rs 1,000 per month to workers engaged in unorganised sectors.

The pension could be still higher if the worker is able to voluntarily save more through higher contribution.

Finance Minister Pranab Mukherjee in likely to launch the scheme in the first week of July from Rai Bareli, the Lok Sabha constituency of Congress president Sonia Gandhi.

R Gopalan, financial services secretary, has begun consultations with the heads of the Life Insurance Corporation, the Insurance Regulatory and Development Authority, and the Pension Fund Regulatory Authority Fund, as a prerequisite to the implementation of the scheme. The scheme is likely to get final shape by mid-May.

Initially, the scheme will be available for only three years. Its continuation will depend on the response it gets from the unorganised sector. The government will pay the pension as the scheme is to be run by the state-run Life Insurance Corporation of India under the supervision of the Pension Fund Regulatory and Development Authority.

Under the scheme, a worker will have to contribute Rs.100 a month for 20 years to be eligible for drawing the pension until death or completion of 60 years of age. The central government will put Rs.1,000 a year for the first three years in each such pension account opened as part of the government's commitment to provide social security to the vulnerable sections of the society.

Mukherjee has earmarked Rs 100 crore (Rs 1 billion) in the 2010-11 Union Budget for the scheme that will benefit up to 1 million (10 lakh) workers. While presenting the Budget in the Lok Sabha on February 26, the finance minister had appealed to the state governments to contribute a similar amount to make the scheme more robust.

Although he does not expect an unorganised worker be able to pay more than Rs 100 a month to enjoy the pension benefits that the government employees enjoy, Mukherjee has set the minimum limit of Rs 1,000 a year and the maximum limit of Rs 12,000 as contribution to the scheme.

Informed sources say that this is the same New Pension Scheme that was made available to all Indians -- in the age group of 18 to 55 years who are not a part of any scheme for economic security after retirement from work -- on May 1 last year.

Gopalan has already discussed the new scheme with IRDA chairman J Hari Narayanan to give clearance to the scheme at the earliest. Gopalan says there are 1.4 million LIC agents in India and the government plans to incentivise them to attract the unorganised workers to subscribe to the Swavalamban scheme.

If each agent is able to enrol at least three or four workers, there will be at least 5 million subscribers over time.

(Excerpts from a news item of rediff.com 5.4.2010)