What Are The Pension Options For Unorganised Workers?

In India, a significant portion of the workforce is employed in the unorganised sector (informal sector), where workers are typically not entitled to the same retirement benefits or pension plans as their counterparts in the organised sector. However, there are various government initiatives and pension schemes specifically designed to address this gap and provide a financial safety net for workers once they retire. These schemes aim to ensure social security and financial independence in old age.

Pension Options For Unorganised Workers

Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM):

Overview:

The Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) scheme is a pension scheme launched by the Indian government specifically for unorganised sector workers. It provides a monthly pension of ₹3,000 after the age of 60 to workers in the unorganised sector.

Eligibility:

• Workers in the unorganised sector such as street vendors, construction workers, rural laborers, and others earning less than ₹15,000 per month.
• The worker must be between the ages of 18 and 40.

Key Features:

• Monthly pension of ₹3,000 after 60 years.
• The worker contributes a monthly amount based on their age, and the government matches the contribution.
• Free registration for the scheme.
• Affordable contribution: The worker's monthly contribution starts from ₹55, depending on the age.
• Tax benefits under Section 80C.

Best For:

Unorganised workers who need an affordable and reliable pension plan to ensure financial security post-retirement.

National Pension System (NPS) - Tier I:

Overview:

While the National Pension System (NPS) is primarily aimed at organised sector employees, it is open to individuals from the unorganised sector as well. Unorganised sector workers can voluntarily contribute to NPS and build a retirement corpus.

Eligibility:

• Any Indian citizen between the ages of 18 and 65.

Key Features:

• Tax benefits under Section 80C and 80CCD.
• Flexible contribution options: The amount contributed can be as low as ₹500 per month.
• Provides market-linked returns through investments in equity, debt, and government securities.
• At retirement, a portion of the corpus must be used to purchase an annuity, ensuring a regular income.

Best For:

Workers in the unorganised sector who can afford to invest a portion of their income for long-term retirement planning.

Atal Pension Yojana (APY):

Overview:

The Atal Pension Yojana (APY) is another government scheme targeted towards unorganised sector workers. It provides a fixed monthly pension ranging from ₹1,000 to ₹5,000 after the age of 60, depending on the contribution made.

Eligibility:

• Unorganised sector workers aged between 18 and 40.
• A bank account in their name.

Key Features:

• The worker chooses the pension amount they desire at the time of enrollment, and the government contributes to the scheme as well.
• The monthly contribution depends on the desired pension and the age of entry.
• Guaranteed pension from ₹1,000 to ₹5,000 per month at the age of 60.
• Tax benefits under Section 80CCD.
• The pension is provided to the worker's spouse after their death and to the nominee after the spouse’s death.

Best For:

Unorganised workers who prefer a fixed and predictable monthly income after retirement.

Employees' Pension Scheme (EPS) for Informal Sector Workers:

Overview:

While the Employees' Pension Scheme (EPS) is generally meant for the formal sector, informal sector workers who work with companies or institutions that have a Provident Fund (PF) scheme can also benefit from the EPS under certain conditions.

Key Features:

• Workers who have contributed to Employee Provident Fund (EPF) can also avail pension benefits under EPS.
• Provides monthly pension after the age of 58, based on the worker’s salary and years of service.
• Workers who have worked in industries where PF is applicable can transfer their PF balance to EPS for pension benefits.

Best For:

Workers who are employed in informal sectors with some level of formal employment or temporary contracts.

Social Security Benefits Under Various Government Schemes:

Overview:

The government provides various social security schemes aimed at providing safety nets for vulnerable unorganised sector workers. These schemes are not always pension schemes but may include healthcare and life insurance, which can indirectly help workers prepare for retirement.

Key Features:

• Schemes like the PM Jan Arogya Yojana (PMJAY) and PM Suraksha Bima Yojana provide social security benefits like health insurance, accidental death coverage, etc.
• While these aren’t directly pension-related, they help unorganised workers reduce their post-retirement financial burdens.

State-Specific Pension Schemes:

Several state governments also offer their own pension schemes for unorganised workers, focusing on regional needs and circumstances. These schemes generally aim to support elderly unorganised workers.

Example:

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provides wages for manual labor in rural areas. Some states also offer old-age pensions for those without regular incomes.

Example:

Ravi, a 38-year-old street vendor in Delhi, decides to enroll in the Pradhan Mantri Shram Yogi Maan-dhan scheme at the age of 38. He contributes ₹100 per month, which is matched by the government. After reaching 60 years, he starts receiving ₹3,000 per month as a pension, ensuring financial security in his retirement years.

Conclusion:

There are several pension options available to unorganised sector workers in India, such as the Pradhan Mantri Shram Yogi Maan-dhan, Atal Pension Yojana, and National Pension System (NPS). These schemes provide unorganised workers with opportunities to save for retirement, ensure regular income in old age, and gain financial security. By starting early and contributing regularly, unorganised sector workers can build a substantial retirement corpus to support themselves in their post-retirement years.