Pension Reforms to reach Rs 4,06,400cr by 2025

New Delhi, Apr 10 (UNI) The reforms in the Indian pension system is touted to have a market size of Rs 4,06,400 crore by 2025 as against Rs 56,100 crore currently.

The financial strain of liabilities on the Government under the conventional pay-as-you-go ('PAYG') system is becoming too high to be sustainable, which is seen as a major driver behind these reforms, a report on Pension Reforms presented by KPMG and FICCI stated here today.

''The issue of financial strain is of prime importance. However, the need for reform also arises from the fact that less than 10 per cent of the country's labour force is covered by government sponsored or mandated schemes,'' said Mr Sanjay Aggarwal, Partner, KPMG (India).

Distribution will be the key aspect in increasing the pension coverage, it added. Thus, banks, life insurance companies and insurance distribution intermediaries, post offices, affinity groups/NGOs can be potential distributors due to their widespread distribution network.

FICCI President Habil Khorakiwala said, ''As the capital market and pension sectors are closely related, it will become necessary to undertake capital market reforms along with pension reforms.'' The regulator will have to play a key role in customer education with a view to not just to create awareness, but also to educate customers to choose their plan asset allocation and vesting age.

The report said that reforms in the pension sector would inflate the capital markets, thus it will require advanced management techniques in the capital markets like the derivative segment for managing the extra inflow of funds.

The overall economic gain would be substantial as the mobilisation of assets would lead to effective investments in stock, bond and mortgage markets, supplying the capital to finance corporate growth, government infrastructure and to finance housing through market choice.

The ongoing financial sector reform has already made significant progress in the spheres of banking, capital markets and insurance, and has laid the foundation for reform in the pension sector.

UNI