Inadequate annuity coverage for India’s senior citizens can lead to a “systemic risk”in the economy, the Reserve Bank of India’s (RBI) Financial Stability Report (FSR) said this week. The report, released on June 28, also highlights factors contributing to its resilience and stability.

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Citing the NITI Aayog’s position paper, FSR states that 78 per cent of India’s elderly population do not have pension coverage. This data holds significance as according to UN estimates, while their population has been growing at a 41 per cent rate in every decade, it is expected to double by 2050, or elderly people will constitute around 20 per cent of the country’s population. At this rate, there will be more elderly people than children between zero and 15 years of age by 2046.

This situation raises concern about access to pension for all. Currently, the central government runs several pension schemes jointly with the state or independently, which include the National Pension System (NPS), Atal Pension Yojna (APY), Indira Gandhi Old Age Pension Scheme (IGNOAPS), Pradhan Mantri Vaya Vandana Yojana, etc. As per the RBI report, NPS and APY memberships continue to increase, driven by increased awareness and disposable income.

NPS and APY Growth over the Past Year

Increased awareness of the importance of pensions has contributed to the growth of NPS and APY subscriptions and their assets under management (AUMs). According to the FSR, NPS and APY subscribers grew by 16.3 per cent YoY in FY2023-24, while their AUMs rose by 30.5 per cent in the same period. As of March 2024, their combined subscribers totalled 7.35 crore, with a shared AUM of Rs 11.72 lakh crore.

The employees of the state governments accounted for the highest number of subscribers, followed by the all-citizen model. In terms of AUM, contributions from the state government employees were the highest, followed by the central government and corporate employees. The report emphasises that “an effective participation and coordination between private and public entities, and a multipronged and multiagency approach, are essential to make India a fully pensioned society.”

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Cyber Security Risks

While modern technologies like artificial intelligence (AI) and the Internet of Things (IoT) are replacing the old manual system of providing services to improve efficiency in the pension eco-system, they also pose cybersecurity risks. The Pension Fund Regulatory and Development Authority (PFRDA), which regulates the NPS and APY schemes, calls for active cooperation from all stakeholders to make the system robust and risk-free. The report highlights that regulatory initiatives based on best global practices have enhanced customer protection and helped reduce digital threats.