Indian Pension Regulator Contemplates Extending Coverage, Increasing Retirement Age

The Employee Provident Fund Organization (EPFO), India’s pension regulator, has proposed to extend the social benefits to more formal and self-employed workers and raise the official retirement age. 

• The proposal is to eliminate the current wage ceiling - Rs 15,000 ($185) per month, and the threshold of company size that only companies with 20 or more people can join EPFO schemes. Under the new proposal, all formal and self-employed workers can enroll in the retirement savings schemes.
  
  
• More significantly, EPFO proposes to substantially increase the retirement age. The official retirement age in India varies from 58 to 65 years, depending on public or private enterprise. The increase is to align with the country’s longer life expectancy and ensure the viability of the pension system to provide adequate retirement benefits for an aging population.  
  
  
• However, only 9% of the population currently have access have EPFO-type benefits. Experts say raising the retirement age is only a part of the solution. The government also need to create more formal jobs and include more workers under the social benefit net.

Outlook: If all these proposals are approved, employers will need to prepare for potential increase in wage costs, due to larger contribution to EPFO, and how to factor these into CTC.