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FM roots for quick pension reforms

Melbourne, Nov. 18 (PTI): India wants comprehensive pension reforms in both developed and developing countries. It is concerned about the problems of an ageing population the world over and feels the challenges are similar in both developed and developing nations.

“...The reform of the pension system must begin now because it is already too late and the management of pension funds will be the most important challenge faced by financial institutions,” finance minister P. Chidambaram said at the G-20 finance ministers meeting here.

“Huge payment obligations stare in the face of ageing countries and half measures will not do. The alternative is fiscal stress and destabilisation of the macro-economic balance,” he said.

An unfunded pension system is unmitigated disaster, Chidambaram said, adding it is universally acknowledged that the ‘pay as you go’ system is unsustainable even in the medium term.

“Every worker must save for his or her retirement and the government or employer may consider making a matching contribution,” he said.

Thus, the contribution will be a defined one and the benefit will depend upon the manner in which accumulations are invested and the overall performance of the economy, the finance minister said.

Chidambaram has been finding it difficult to implement pension reforms in the country in the face of stiff opposition from the Left parties.

Referring to the ageing population in developed countries, Chidambaram said apart from pension reforms, the governments may be required to design a more appropriate social security net, including modified healthcare plans that lay emphasis on the needs of the aged.

These countries will have to devise financial products for meeting the healthcare and consumption requirements of the elderly, he said.

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