Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 73
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
$message = 'The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 73
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
$stackFrame = (int) 1
$trace = [
	(int) 0 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ServerRequest.php',
		'line' => (int) 2421,
		'function' => 'deprecationWarning',
		'args' => [
			(int) 0 => 'The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead.'
		]
	],
	(int) 1 => [
		'file' => '/home/brlfuser/public_html/src/Controller/ArtileDetailController.php',
		'line' => (int) 73,
		'function' => 'offsetGet',
		'class' => 'Cake\Http\ServerRequest',
		'object' => object(Cake\Http\ServerRequest) {},
		'type' => '->',
		'args' => [
			(int) 0 => 'catslug'
		]
	],
	(int) 2 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Controller/Controller.php',
		'line' => (int) 610,
		'function' => 'printArticle',
		'class' => 'App\Controller\ArtileDetailController',
		'object' => object(App\Controller\ArtileDetailController) {},
		'type' => '->',
		'args' => []
	],
	(int) 3 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ActionDispatcher.php',
		'line' => (int) 120,
		'function' => 'invokeAction',
		'class' => 'Cake\Controller\Controller',
		'object' => object(App\Controller\ArtileDetailController) {},
		'type' => '->',
		'args' => []
	],
	(int) 4 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ActionDispatcher.php',
		'line' => (int) 94,
		'function' => '_invoke',
		'class' => 'Cake\Http\ActionDispatcher',
		'object' => object(Cake\Http\ActionDispatcher) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(App\Controller\ArtileDetailController) {}
		]
	],
	(int) 5 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/BaseApplication.php',
		'line' => (int) 235,
		'function' => 'dispatch',
		'class' => 'Cake\Http\ActionDispatcher',
		'object' => object(Cake\Http\ActionDispatcher) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 6 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Http\BaseApplication',
		'object' => object(App\Application) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 7 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Routing/Middleware/RoutingMiddleware.php',
		'line' => (int) 162,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 8 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Routing\Middleware\RoutingMiddleware',
		'object' => object(Cake\Routing\Middleware\RoutingMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 9 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Routing/Middleware/AssetMiddleware.php',
		'line' => (int) 88,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 10 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Routing\Middleware\AssetMiddleware',
		'object' => object(Cake\Routing\Middleware\AssetMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 11 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Middleware/ErrorHandlerMiddleware.php',
		'line' => (int) 96,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 12 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Error\Middleware\ErrorHandlerMiddleware',
		'object' => object(Cake\Error\Middleware\ErrorHandlerMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 13 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 51,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 14 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Server.php',
		'line' => (int) 98,
		'function' => 'run',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\MiddlewareQueue) {},
			(int) 1 => object(Cake\Http\ServerRequest) {},
			(int) 2 => object(Cake\Http\Response) {}
		]
	],
	(int) 15 => [
		'file' => '/home/brlfuser/public_html/webroot/index.php',
		'line' => (int) 39,
		'function' => 'run',
		'class' => 'Cake\Http\Server',
		'object' => object(Cake\Http\Server) {},
		'type' => '->',
		'args' => []
	]
]
$frame = [
	'file' => '/home/brlfuser/public_html/src/Controller/ArtileDetailController.php',
	'line' => (int) 73,
	'function' => 'offsetGet',
	'class' => 'Cake\Http\ServerRequest',
	'object' => object(Cake\Http\ServerRequest) {
		trustProxy => false
		[protected] params => [
			[maximum depth reached]
		]
		[protected] data => [[maximum depth reached]]
		[protected] query => [[maximum depth reached]]
		[protected] cookies => [
			[maximum depth reached]
		]
		[protected] _environment => [
			[maximum depth reached]
		]
		[protected] url => 'latest-news-updates/towards-a-secure-retirement-renuka-sane-18611/print'
		[protected] base => ''
		[protected] webroot => '/'
		[protected] here => '/latest-news-updates/towards-a-secure-retirement-renuka-sane-18611/print'
		[protected] trustedProxies => [[maximum depth reached]]
		[protected] _input => null
		[protected] _detectors => [
			[maximum depth reached]
		]
		[protected] _detectorCache => [
			[maximum depth reached]
		]
		[protected] stream => object(Zend\Diactoros\PhpInputStream) {}
		[protected] uri => object(Zend\Diactoros\Uri) {}
		[protected] session => object(Cake\Http\Session) {}
		[protected] attributes => [[maximum depth reached]]
		[protected] emulatedAttributes => [
			[maximum depth reached]
		]
		[protected] uploadedFiles => [[maximum depth reached]]
		[protected] protocol => null
		[protected] requestTarget => null
		[private] deprecatedProperties => [
			[maximum depth reached]
		]
	},
	'type' => '->',
	'args' => [
		(int) 0 => 'catslug'
	]
]
deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
App\Controller\ArtileDetailController::printArticle() - APP/Controller/ArtileDetailController.php, line 73
Cake\Controller\Controller::invokeAction() - CORE/src/Controller/Controller.php, line 610
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 120
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 74
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
$message = 'The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 74
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
$stackFrame = (int) 1
$trace = [
	(int) 0 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ServerRequest.php',
		'line' => (int) 2421,
		'function' => 'deprecationWarning',
		'args' => [
			(int) 0 => 'The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead.'
		]
	],
	(int) 1 => [
		'file' => '/home/brlfuser/public_html/src/Controller/ArtileDetailController.php',
		'line' => (int) 74,
		'function' => 'offsetGet',
		'class' => 'Cake\Http\ServerRequest',
		'object' => object(Cake\Http\ServerRequest) {},
		'type' => '->',
		'args' => [
			(int) 0 => 'artileslug'
		]
	],
	(int) 2 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Controller/Controller.php',
		'line' => (int) 610,
		'function' => 'printArticle',
		'class' => 'App\Controller\ArtileDetailController',
		'object' => object(App\Controller\ArtileDetailController) {},
		'type' => '->',
		'args' => []
	],
	(int) 3 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ActionDispatcher.php',
		'line' => (int) 120,
		'function' => 'invokeAction',
		'class' => 'Cake\Controller\Controller',
		'object' => object(App\Controller\ArtileDetailController) {},
		'type' => '->',
		'args' => []
	],
	(int) 4 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/ActionDispatcher.php',
		'line' => (int) 94,
		'function' => '_invoke',
		'class' => 'Cake\Http\ActionDispatcher',
		'object' => object(Cake\Http\ActionDispatcher) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(App\Controller\ArtileDetailController) {}
		]
	],
	(int) 5 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/BaseApplication.php',
		'line' => (int) 235,
		'function' => 'dispatch',
		'class' => 'Cake\Http\ActionDispatcher',
		'object' => object(Cake\Http\ActionDispatcher) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 6 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Http\BaseApplication',
		'object' => object(App\Application) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 7 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Routing/Middleware/RoutingMiddleware.php',
		'line' => (int) 162,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 8 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Routing\Middleware\RoutingMiddleware',
		'object' => object(Cake\Routing\Middleware\RoutingMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 9 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Routing/Middleware/AssetMiddleware.php',
		'line' => (int) 88,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 10 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Routing\Middleware\AssetMiddleware',
		'object' => object(Cake\Routing\Middleware\AssetMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 11 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Middleware/ErrorHandlerMiddleware.php',
		'line' => (int) 96,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 12 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 65,
		'function' => '__invoke',
		'class' => 'Cake\Error\Middleware\ErrorHandlerMiddleware',
		'object' => object(Cake\Error\Middleware\ErrorHandlerMiddleware) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {},
			(int) 2 => object(Cake\Http\Runner) {}
		]
	],
	(int) 13 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Runner.php',
		'line' => (int) 51,
		'function' => '__invoke',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\ServerRequest) {},
			(int) 1 => object(Cake\Http\Response) {}
		]
	],
	(int) 14 => [
		'file' => '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Http/Server.php',
		'line' => (int) 98,
		'function' => 'run',
		'class' => 'Cake\Http\Runner',
		'object' => object(Cake\Http\Runner) {},
		'type' => '->',
		'args' => [
			(int) 0 => object(Cake\Http\MiddlewareQueue) {},
			(int) 1 => object(Cake\Http\ServerRequest) {},
			(int) 2 => object(Cake\Http\Response) {}
		]
	],
	(int) 15 => [
		'file' => '/home/brlfuser/public_html/webroot/index.php',
		'line' => (int) 39,
		'function' => 'run',
		'class' => 'Cake\Http\Server',
		'object' => object(Cake\Http\Server) {},
		'type' => '->',
		'args' => []
	]
]
$frame = [
	'file' => '/home/brlfuser/public_html/src/Controller/ArtileDetailController.php',
	'line' => (int) 74,
	'function' => 'offsetGet',
	'class' => 'Cake\Http\ServerRequest',
	'object' => object(Cake\Http\ServerRequest) {
		trustProxy => false
		[protected] params => [
			[maximum depth reached]
		]
		[protected] data => [[maximum depth reached]]
		[protected] query => [[maximum depth reached]]
		[protected] cookies => [
			[maximum depth reached]
		]
		[protected] _environment => [
			[maximum depth reached]
		]
		[protected] url => 'latest-news-updates/towards-a-secure-retirement-renuka-sane-18611/print'
		[protected] base => ''
		[protected] webroot => '/'
		[protected] here => '/latest-news-updates/towards-a-secure-retirement-renuka-sane-18611/print'
		[protected] trustedProxies => [[maximum depth reached]]
		[protected] _input => null
		[protected] _detectors => [
			[maximum depth reached]
		]
		[protected] _detectorCache => [
			[maximum depth reached]
		]
		[protected] stream => object(Zend\Diactoros\PhpInputStream) {}
		[protected] uri => object(Zend\Diactoros\Uri) {}
		[protected] session => object(Cake\Http\Session) {}
		[protected] attributes => [[maximum depth reached]]
		[protected] emulatedAttributes => [
			[maximum depth reached]
		]
		[protected] uploadedFiles => [[maximum depth reached]]
		[protected] protocol => null
		[protected] requestTarget => null
		[private] deprecatedProperties => [
			[maximum depth reached]
		]
	},
	'type' => '->',
	'args' => [
		(int) 0 => 'artileslug'
	]
]
deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
App\Controller\ArtileDetailController::printArticle() - APP/Controller/ArtileDetailController.php, line 74
Cake\Controller\Controller::invokeAction() - CORE/src/Controller/Controller.php, line 610
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 120
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Warning (512): Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853 [CORE/src/Http/ResponseEmitter.php, line 48]
Code Context
            if (Configure::read('debug')) {

                trigger_error($message, E_USER_WARNING);

            } else {
$response = object(Cake\Http\Response) {

	'status' => (int) 200,
	'contentType' => 'text/html',
	'headers' => [
		'Content-Type' => [
			[maximum depth reached]
		]
	],
	'file' => null,
	'fileRange' => [],
	'cookies' => object(Cake\Http\Cookie\CookieCollection) {},
	'cacheDirectives' => [],
	'body' => '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
        "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
    <link rel="canonical" href="https://im4change.in/<pre class="cake-error"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-trace').style.display = (document.getElementById('cakeErr6805225dec17c-trace').style.display == 'none' ? '' : 'none');"><b>Notice</b> (8)</a>: Undefined variable: urlPrefix [<b>APP/Template/Layout/printlayout.ctp</b>, line <b>8</b>]<div id="cakeErr6805225dec17c-trace" class="cake-stack-trace" style="display: none;"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-code').style.display = (document.getElementById('cakeErr6805225dec17c-code').style.display == 'none' ? '' : 'none')">Code</a> <a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-context').style.display = (document.getElementById('cakeErr6805225dec17c-context').style.display == 'none' ? '' : 'none')">Context</a><pre id="cakeErr6805225dec17c-code" class="cake-code-dump" style="display: none;"><code><span style="color: #000000"><span style="color: #0000BB"></span><span style="color: #007700">&lt;</span><span style="color: #0000BB">head</span><span style="color: #007700">&gt;
</span></span></code>
<span class="code-highlight"><code><span style="color: #000000">&nbsp;&nbsp;&nbsp;&nbsp;&lt;link&nbsp;rel="canonical"&nbsp;href="<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">Configure</span><span style="color: #007700">::</span><span style="color: #0000BB">read</span><span style="color: #007700">(</span><span style="color: #DD0000">'SITE_URL'</span><span style="color: #007700">);&nbsp;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$urlPrefix</span><span style="color: #007700">;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">category</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">slug</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>/<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">seo_url</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>.html"/&gt;
</span></code></span>
<code><span style="color: #000000"><span style="color: #0000BB">&nbsp;&nbsp;&nbsp;&nbsp;</span><span style="color: #007700">&lt;</span><span style="color: #0000BB">meta&nbsp;http</span><span style="color: #007700">-</span><span style="color: #0000BB">equiv</span><span style="color: #007700">=</span><span style="color: #DD0000">"Content-Type"&nbsp;</span><span style="color: #0000BB">content</span><span style="color: #007700">=</span><span style="color: #DD0000">"text/html;&nbsp;charset=utf-8"</span><span style="color: #007700">/&gt;
</span></span></code></pre><pre id="cakeErr6805225dec17c-context" class="cake-context" style="display: none;">$viewFile = &#039;/home/brlfuser/public_html/src/Template/Layout/printlayout.ctp&#039;
$dataForView = [
	&#039;article_current&#039; =&gt; object(App\Model\Entity\Article) {

		&#039;id&#039; =&gt; (int) 18479,
		&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
		&#039;subheading&#039; =&gt; &#039;&#039;,
		&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
		&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
		&#039;article_img&#039; =&gt; &#039;&#039;,
		&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
		&#039;status&#039; =&gt; (int) 1,
		&#039;show_on_home&#039; =&gt; (int) 1,
		&#039;lang&#039; =&gt; &#039;EN&#039;,
		&#039;category_id&#039; =&gt; (int) 16,
		&#039;tag_keyword&#039; =&gt; &#039;&#039;,
		&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
		&#039;meta_title&#039; =&gt; null,
		&#039;meta_keywords&#039; =&gt; null,
		&#039;meta_description&#039; =&gt; null,
		&#039;noindex&#039; =&gt; (int) 0,
		&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
		&#039;most_visit_section_id&#039; =&gt; null,
		&#039;article_big_img&#039; =&gt; null,
		&#039;liveid&#039; =&gt; (int) 18611,
		&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;edate&#039; =&gt; &#039;&#039;,
		&#039;tags&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
		&#039;[new]&#039; =&gt; false,
		&#039;[accessible]&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;[dirty]&#039; =&gt; [[maximum depth reached]],
		&#039;[original]&#039; =&gt; [[maximum depth reached]],
		&#039;[virtual]&#039; =&gt; [[maximum depth reached]],
		&#039;[hasErrors]&#039; =&gt; false,
		&#039;[errors]&#039; =&gt; [[maximum depth reached]],
		&#039;[invalid]&#039; =&gt; [[maximum depth reached]],
		&#039;[repository]&#039; =&gt; &#039;Articles&#039;
	
	},
	&#039;articleid&#039; =&gt; (int) 18479,
	&#039;metaTitle&#039; =&gt; &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;,
	&#039;metaKeywords&#039; =&gt; &#039;Social Security,Labour,Pension,Old Age Pension&#039;,
	&#039;metaDesc&#039; =&gt; &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;,
	&#039;lang&#039; =&gt; &#039;English&#039;,
	&#039;SITE_URL&#039; =&gt; &#039;https://im4change.in/&#039;,
	&#039;site_title&#039; =&gt; &#039;im4change&#039;,
	&#039;adminprix&#039; =&gt; &#039;admin&#039;
]
$article_current = object(App\Model\Entity\Article) {

	&#039;id&#039; =&gt; (int) 18479,
	&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
	&#039;subheading&#039; =&gt; &#039;&#039;,
	&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
	&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
	&#039;article_img&#039; =&gt; &#039;&#039;,
	&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
	&#039;status&#039; =&gt; (int) 1,
	&#039;show_on_home&#039; =&gt; (int) 1,
	&#039;lang&#039; =&gt; &#039;EN&#039;,
	&#039;category_id&#039; =&gt; (int) 16,
	&#039;tag_keyword&#039; =&gt; &#039;&#039;,
	&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
	&#039;meta_title&#039; =&gt; null,
	&#039;meta_keywords&#039; =&gt; null,
	&#039;meta_description&#039; =&gt; null,
	&#039;noindex&#039; =&gt; (int) 0,
	&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
	&#039;most_visit_section_id&#039; =&gt; null,
	&#039;article_big_img&#039; =&gt; null,
	&#039;liveid&#039; =&gt; (int) 18611,
	&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;edate&#039; =&gt; &#039;&#039;,
	&#039;tags&#039; =&gt; [
		(int) 0 =&gt; object(Cake\ORM\Entity) {},
		(int) 1 =&gt; object(Cake\ORM\Entity) {},
		(int) 2 =&gt; object(Cake\ORM\Entity) {},
		(int) 3 =&gt; object(Cake\ORM\Entity) {}
	],
	&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
	&#039;[new]&#039; =&gt; false,
	&#039;[accessible]&#039; =&gt; [
		&#039;*&#039; =&gt; true,
		&#039;id&#039; =&gt; false
	],
	&#039;[dirty]&#039; =&gt; [],
	&#039;[original]&#039; =&gt; [],
	&#039;[virtual]&#039; =&gt; [],
	&#039;[hasErrors]&#039; =&gt; false,
	&#039;[errors]&#039; =&gt; [],
	&#039;[invalid]&#039; =&gt; [],
	&#039;[repository]&#039; =&gt; &#039;Articles&#039;

}
$articleid = (int) 18479
$metaTitle = &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;
$metaKeywords = &#039;Social Security,Labour,Pension,Old Age Pension&#039;
$metaDesc = &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;
$disp = &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;
$lang = &#039;English&#039;
$SITE_URL = &#039;https://im4change.in/&#039;
$site_title = &#039;im4change&#039;
$adminprix = &#039;admin&#039;</pre><pre class="stack-trace">include - APP/Template/Layout/printlayout.ctp, line 8
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1413
Cake\View\View::_render() - CORE/src/View/View.php, line 1374
Cake\View\View::renderLayout() - CORE/src/View/View.php, line 927
Cake\View\View::render() - CORE/src/View/View.php, line 885
Cake\Controller\Controller::render() - CORE/src/Controller/Controller.php, line 791
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 126
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51</pre></div></pre>latest-news-updates/towards-a-secure-retirement-renuka-sane-18611.html"/>
    <meta http-equiv="Content-Type" content="text/html; charset=utf-8"/>
    <link href="https://im4change.in/css/control.css" rel="stylesheet" type="text/css"
          media="all"/>
    <title>LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane | Im4change.org</title>
    <meta name="description" content="
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per..."/>
    <script src="https://im4change.in/js/jquery-1.10.2.js"></script>
    <script type="text/javascript" src="https://im4change.in/js/jquery-migrate.min.js"></script>
    <script language="javascript" type="text/javascript">

        $(document).ready(function () {
            var img = $("img")[0]; // Get my img elem
            var pic_real_width, pic_real_height;
            $("<img/>") // Make in memory copy of image to avoid css issues
                .attr("src", $(img).attr("src"))
                .load(function () {
                    pic_real_width = this.width;   // Note: $(this).width() will not
                    pic_real_height = this.height; // work for in memory images.
                });
        });
    </script>
    <style type="text/css">
        @media screen {
            div.divFooter {
                display: block;
            }
        }

        @media print {
            .printbutton {
                display: none !important;
            }
        }
    </style>
</head>
<body>
<table cellpadding="0" cellspacing="0" border="0" width="98%" align="center">
    <tr>
        <td class="top_bg">
            <div class="divFooter">
                <img src="https://im4change.in/images/logo1.jpg" height="59" border="0"
                     alt="Resource centre on India's rural distress" style="padding-top:14px;"/>
            </div>

        </td>
    </tr>
    <tr>
        <td id="topspace">&nbsp;</td>
    </tr>

    <tr id="topspace">
        <td>&nbsp;</td>
    </tr>
    <tr>
        <td height="50" style="border-bottom:1px solid #000; padding-top:10px;" class="printbutton">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>

    <tr>
        <td width="100%">
            <h1 class="news_headlines" style="font-style:normal">
                <strong>Towards a secure retirement-Renuka Sane</strong></h1>
        </td>
    </tr>
    <tr>
        <td width="100%" style="font-family:Arial, 'Segoe Script', 'Segoe UI', sans-serif, serif"><font size="3">
                <div style="text-align: justify">-The Indian Express</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>Increasing provident fund contributions within a faulty system is not the answer</em></div><div style="text-align: justify"><br /></div><div style="text-align: justify">The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em></div>               </font>
        </td>
    </tr>
    <tr>
        <td>&nbsp;</td>
    </tr>

    <tr>
        <td height="50" style="border-top:1px solid #000; border-bottom:1px solid #000;padding-top:10px;">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>
</table></body>
</html>'

}
$maxBufferLength = (int) 8192
$file = '/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php'
$line = (int) 853
$message = 'Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853'
Cake\Http\ResponseEmitter::emit() - CORE/src/Http/ResponseEmitter.php, line 48
Cake\Http\Server::emit() - CORE/src/Http/Server.php, line 141
[main] - ROOT/webroot/index.php, line 39

Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 148]
Code Context
            $response->getStatusCode(),

            ($reasonPhrase ? ' ' . $reasonPhrase : '')

        ));
$response = object(Cake\Http\Response) {

	'status' => (int) 200,
	'contentType' => 'text/html',
	'headers' => [
		'Content-Type' => [
			[maximum depth reached]
		]
	],
	'file' => null,
	'fileRange' => [],
	'cookies' => object(Cake\Http\Cookie\CookieCollection) {},
	'cacheDirectives' => [],
	'body' => '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
        "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
    <link rel="canonical" href="https://im4change.in/<pre class="cake-error"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-trace').style.display = (document.getElementById('cakeErr6805225dec17c-trace').style.display == 'none' ? '' : 'none');"><b>Notice</b> (8)</a>: Undefined variable: urlPrefix [<b>APP/Template/Layout/printlayout.ctp</b>, line <b>8</b>]<div id="cakeErr6805225dec17c-trace" class="cake-stack-trace" style="display: none;"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-code').style.display = (document.getElementById('cakeErr6805225dec17c-code').style.display == 'none' ? '' : 'none')">Code</a> <a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-context').style.display = (document.getElementById('cakeErr6805225dec17c-context').style.display == 'none' ? '' : 'none')">Context</a><pre id="cakeErr6805225dec17c-code" class="cake-code-dump" style="display: none;"><code><span style="color: #000000"><span style="color: #0000BB"></span><span style="color: #007700">&lt;</span><span style="color: #0000BB">head</span><span style="color: #007700">&gt;
</span></span></code>
<span class="code-highlight"><code><span style="color: #000000">&nbsp;&nbsp;&nbsp;&nbsp;&lt;link&nbsp;rel="canonical"&nbsp;href="<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">Configure</span><span style="color: #007700">::</span><span style="color: #0000BB">read</span><span style="color: #007700">(</span><span style="color: #DD0000">'SITE_URL'</span><span style="color: #007700">);&nbsp;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$urlPrefix</span><span style="color: #007700">;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">category</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">slug</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>/<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">seo_url</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>.html"/&gt;
</span></code></span>
<code><span style="color: #000000"><span style="color: #0000BB">&nbsp;&nbsp;&nbsp;&nbsp;</span><span style="color: #007700">&lt;</span><span style="color: #0000BB">meta&nbsp;http</span><span style="color: #007700">-</span><span style="color: #0000BB">equiv</span><span style="color: #007700">=</span><span style="color: #DD0000">"Content-Type"&nbsp;</span><span style="color: #0000BB">content</span><span style="color: #007700">=</span><span style="color: #DD0000">"text/html;&nbsp;charset=utf-8"</span><span style="color: #007700">/&gt;
</span></span></code></pre><pre id="cakeErr6805225dec17c-context" class="cake-context" style="display: none;">$viewFile = &#039;/home/brlfuser/public_html/src/Template/Layout/printlayout.ctp&#039;
$dataForView = [
	&#039;article_current&#039; =&gt; object(App\Model\Entity\Article) {

		&#039;id&#039; =&gt; (int) 18479,
		&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
		&#039;subheading&#039; =&gt; &#039;&#039;,
		&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
		&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
		&#039;article_img&#039; =&gt; &#039;&#039;,
		&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
		&#039;status&#039; =&gt; (int) 1,
		&#039;show_on_home&#039; =&gt; (int) 1,
		&#039;lang&#039; =&gt; &#039;EN&#039;,
		&#039;category_id&#039; =&gt; (int) 16,
		&#039;tag_keyword&#039; =&gt; &#039;&#039;,
		&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
		&#039;meta_title&#039; =&gt; null,
		&#039;meta_keywords&#039; =&gt; null,
		&#039;meta_description&#039; =&gt; null,
		&#039;noindex&#039; =&gt; (int) 0,
		&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
		&#039;most_visit_section_id&#039; =&gt; null,
		&#039;article_big_img&#039; =&gt; null,
		&#039;liveid&#039; =&gt; (int) 18611,
		&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;edate&#039; =&gt; &#039;&#039;,
		&#039;tags&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
		&#039;[new]&#039; =&gt; false,
		&#039;[accessible]&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;[dirty]&#039; =&gt; [[maximum depth reached]],
		&#039;[original]&#039; =&gt; [[maximum depth reached]],
		&#039;[virtual]&#039; =&gt; [[maximum depth reached]],
		&#039;[hasErrors]&#039; =&gt; false,
		&#039;[errors]&#039; =&gt; [[maximum depth reached]],
		&#039;[invalid]&#039; =&gt; [[maximum depth reached]],
		&#039;[repository]&#039; =&gt; &#039;Articles&#039;
	
	},
	&#039;articleid&#039; =&gt; (int) 18479,
	&#039;metaTitle&#039; =&gt; &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;,
	&#039;metaKeywords&#039; =&gt; &#039;Social Security,Labour,Pension,Old Age Pension&#039;,
	&#039;metaDesc&#039; =&gt; &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;,
	&#039;lang&#039; =&gt; &#039;English&#039;,
	&#039;SITE_URL&#039; =&gt; &#039;https://im4change.in/&#039;,
	&#039;site_title&#039; =&gt; &#039;im4change&#039;,
	&#039;adminprix&#039; =&gt; &#039;admin&#039;
]
$article_current = object(App\Model\Entity\Article) {

	&#039;id&#039; =&gt; (int) 18479,
	&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
	&#039;subheading&#039; =&gt; &#039;&#039;,
	&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
	&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
	&#039;article_img&#039; =&gt; &#039;&#039;,
	&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
	&#039;status&#039; =&gt; (int) 1,
	&#039;show_on_home&#039; =&gt; (int) 1,
	&#039;lang&#039; =&gt; &#039;EN&#039;,
	&#039;category_id&#039; =&gt; (int) 16,
	&#039;tag_keyword&#039; =&gt; &#039;&#039;,
	&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
	&#039;meta_title&#039; =&gt; null,
	&#039;meta_keywords&#039; =&gt; null,
	&#039;meta_description&#039; =&gt; null,
	&#039;noindex&#039; =&gt; (int) 0,
	&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
	&#039;most_visit_section_id&#039; =&gt; null,
	&#039;article_big_img&#039; =&gt; null,
	&#039;liveid&#039; =&gt; (int) 18611,
	&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;edate&#039; =&gt; &#039;&#039;,
	&#039;tags&#039; =&gt; [
		(int) 0 =&gt; object(Cake\ORM\Entity) {},
		(int) 1 =&gt; object(Cake\ORM\Entity) {},
		(int) 2 =&gt; object(Cake\ORM\Entity) {},
		(int) 3 =&gt; object(Cake\ORM\Entity) {}
	],
	&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
	&#039;[new]&#039; =&gt; false,
	&#039;[accessible]&#039; =&gt; [
		&#039;*&#039; =&gt; true,
		&#039;id&#039; =&gt; false
	],
	&#039;[dirty]&#039; =&gt; [],
	&#039;[original]&#039; =&gt; [],
	&#039;[virtual]&#039; =&gt; [],
	&#039;[hasErrors]&#039; =&gt; false,
	&#039;[errors]&#039; =&gt; [],
	&#039;[invalid]&#039; =&gt; [],
	&#039;[repository]&#039; =&gt; &#039;Articles&#039;

}
$articleid = (int) 18479
$metaTitle = &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;
$metaKeywords = &#039;Social Security,Labour,Pension,Old Age Pension&#039;
$metaDesc = &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;
$disp = &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;
$lang = &#039;English&#039;
$SITE_URL = &#039;https://im4change.in/&#039;
$site_title = &#039;im4change&#039;
$adminprix = &#039;admin&#039;</pre><pre class="stack-trace">include - APP/Template/Layout/printlayout.ctp, line 8
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1413
Cake\View\View::_render() - CORE/src/View/View.php, line 1374
Cake\View\View::renderLayout() - CORE/src/View/View.php, line 927
Cake\View\View::render() - CORE/src/View/View.php, line 885
Cake\Controller\Controller::render() - CORE/src/Controller/Controller.php, line 791
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 126
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51</pre></div></pre>latest-news-updates/towards-a-secure-retirement-renuka-sane-18611.html"/>
    <meta http-equiv="Content-Type" content="text/html; charset=utf-8"/>
    <link href="https://im4change.in/css/control.css" rel="stylesheet" type="text/css"
          media="all"/>
    <title>LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane | Im4change.org</title>
    <meta name="description" content="
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per..."/>
    <script src="https://im4change.in/js/jquery-1.10.2.js"></script>
    <script type="text/javascript" src="https://im4change.in/js/jquery-migrate.min.js"></script>
    <script language="javascript" type="text/javascript">

        $(document).ready(function () {
            var img = $("img")[0]; // Get my img elem
            var pic_real_width, pic_real_height;
            $("<img/>") // Make in memory copy of image to avoid css issues
                .attr("src", $(img).attr("src"))
                .load(function () {
                    pic_real_width = this.width;   // Note: $(this).width() will not
                    pic_real_height = this.height; // work for in memory images.
                });
        });
    </script>
    <style type="text/css">
        @media screen {
            div.divFooter {
                display: block;
            }
        }

        @media print {
            .printbutton {
                display: none !important;
            }
        }
    </style>
</head>
<body>
<table cellpadding="0" cellspacing="0" border="0" width="98%" align="center">
    <tr>
        <td class="top_bg">
            <div class="divFooter">
                <img src="https://im4change.in/images/logo1.jpg" height="59" border="0"
                     alt="Resource centre on India's rural distress" style="padding-top:14px;"/>
            </div>

        </td>
    </tr>
    <tr>
        <td id="topspace">&nbsp;</td>
    </tr>

    <tr id="topspace">
        <td>&nbsp;</td>
    </tr>
    <tr>
        <td height="50" style="border-bottom:1px solid #000; padding-top:10px;" class="printbutton">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>

    <tr>
        <td width="100%">
            <h1 class="news_headlines" style="font-style:normal">
                <strong>Towards a secure retirement-Renuka Sane</strong></h1>
        </td>
    </tr>
    <tr>
        <td width="100%" style="font-family:Arial, 'Segoe Script', 'Segoe UI', sans-serif, serif"><font size="3">
                <div style="text-align: justify">-The Indian Express</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>Increasing provident fund contributions within a faulty system is not the answer</em></div><div style="text-align: justify"><br /></div><div style="text-align: justify">The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em></div>               </font>
        </td>
    </tr>
    <tr>
        <td>&nbsp;</td>
    </tr>

    <tr>
        <td height="50" style="border-top:1px solid #000; border-bottom:1px solid #000;padding-top:10px;">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>
</table></body>
</html>'

}
$reasonPhrase = 'OK'
header - [internal], line ??
Cake\Http\ResponseEmitter::emitStatusLine() - CORE/src/Http/ResponseEmitter.php, line 148
Cake\Http\ResponseEmitter::emit() - CORE/src/Http/ResponseEmitter.php, line 54
Cake\Http\Server::emit() - CORE/src/Http/Server.php, line 141
[main] - ROOT/webroot/index.php, line 39

Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 181]
Code Context
                    $value

                ), $first);

                $first = false;
$response = object(Cake\Http\Response) {

	'status' => (int) 200,
	'contentType' => 'text/html',
	'headers' => [
		'Content-Type' => [
			[maximum depth reached]
		]
	],
	'file' => null,
	'fileRange' => [],
	'cookies' => object(Cake\Http\Cookie\CookieCollection) {},
	'cacheDirectives' => [],
	'body' => '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
        "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
    <link rel="canonical" href="https://im4change.in/<pre class="cake-error"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-trace').style.display = (document.getElementById('cakeErr6805225dec17c-trace').style.display == 'none' ? '' : 'none');"><b>Notice</b> (8)</a>: Undefined variable: urlPrefix [<b>APP/Template/Layout/printlayout.ctp</b>, line <b>8</b>]<div id="cakeErr6805225dec17c-trace" class="cake-stack-trace" style="display: none;"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-code').style.display = (document.getElementById('cakeErr6805225dec17c-code').style.display == 'none' ? '' : 'none')">Code</a> <a href="javascript:void(0);" onclick="document.getElementById('cakeErr6805225dec17c-context').style.display = (document.getElementById('cakeErr6805225dec17c-context').style.display == 'none' ? '' : 'none')">Context</a><pre id="cakeErr6805225dec17c-code" class="cake-code-dump" style="display: none;"><code><span style="color: #000000"><span style="color: #0000BB"></span><span style="color: #007700">&lt;</span><span style="color: #0000BB">head</span><span style="color: #007700">&gt;
</span></span></code>
<span class="code-highlight"><code><span style="color: #000000">&nbsp;&nbsp;&nbsp;&nbsp;&lt;link&nbsp;rel="canonical"&nbsp;href="<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">Configure</span><span style="color: #007700">::</span><span style="color: #0000BB">read</span><span style="color: #007700">(</span><span style="color: #DD0000">'SITE_URL'</span><span style="color: #007700">);&nbsp;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$urlPrefix</span><span style="color: #007700">;</span><span style="color: #0000BB">?&gt;&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">category</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">slug</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>/<span style="color: #0000BB">&lt;?php&nbsp;</span><span style="color: #007700">echo&nbsp;</span><span style="color: #0000BB">$article_current</span><span style="color: #007700">-&gt;</span><span style="color: #0000BB">seo_url</span><span style="color: #007700">;&nbsp;</span><span style="color: #0000BB">?&gt;</span>.html"/&gt;
</span></code></span>
<code><span style="color: #000000"><span style="color: #0000BB">&nbsp;&nbsp;&nbsp;&nbsp;</span><span style="color: #007700">&lt;</span><span style="color: #0000BB">meta&nbsp;http</span><span style="color: #007700">-</span><span style="color: #0000BB">equiv</span><span style="color: #007700">=</span><span style="color: #DD0000">"Content-Type"&nbsp;</span><span style="color: #0000BB">content</span><span style="color: #007700">=</span><span style="color: #DD0000">"text/html;&nbsp;charset=utf-8"</span><span style="color: #007700">/&gt;
</span></span></code></pre><pre id="cakeErr6805225dec17c-context" class="cake-context" style="display: none;">$viewFile = &#039;/home/brlfuser/public_html/src/Template/Layout/printlayout.ctp&#039;
$dataForView = [
	&#039;article_current&#039; =&gt; object(App\Model\Entity\Article) {

		&#039;id&#039; =&gt; (int) 18479,
		&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
		&#039;subheading&#039; =&gt; &#039;&#039;,
		&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
		&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
		&#039;article_img&#039; =&gt; &#039;&#039;,
		&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
		&#039;status&#039; =&gt; (int) 1,
		&#039;show_on_home&#039; =&gt; (int) 1,
		&#039;lang&#039; =&gt; &#039;EN&#039;,
		&#039;category_id&#039; =&gt; (int) 16,
		&#039;tag_keyword&#039; =&gt; &#039;&#039;,
		&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
		&#039;meta_title&#039; =&gt; null,
		&#039;meta_keywords&#039; =&gt; null,
		&#039;meta_description&#039; =&gt; null,
		&#039;noindex&#039; =&gt; (int) 0,
		&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
		&#039;most_visit_section_id&#039; =&gt; null,
		&#039;article_big_img&#039; =&gt; null,
		&#039;liveid&#039; =&gt; (int) 18611,
		&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
		&#039;edate&#039; =&gt; &#039;&#039;,
		&#039;tags&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
		&#039;[new]&#039; =&gt; false,
		&#039;[accessible]&#039; =&gt; [
			[maximum depth reached]
		],
		&#039;[dirty]&#039; =&gt; [[maximum depth reached]],
		&#039;[original]&#039; =&gt; [[maximum depth reached]],
		&#039;[virtual]&#039; =&gt; [[maximum depth reached]],
		&#039;[hasErrors]&#039; =&gt; false,
		&#039;[errors]&#039; =&gt; [[maximum depth reached]],
		&#039;[invalid]&#039; =&gt; [[maximum depth reached]],
		&#039;[repository]&#039; =&gt; &#039;Articles&#039;
	
	},
	&#039;articleid&#039; =&gt; (int) 18479,
	&#039;metaTitle&#039; =&gt; &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;,
	&#039;metaKeywords&#039; =&gt; &#039;Social Security,Labour,Pension,Old Age Pension&#039;,
	&#039;metaDesc&#039; =&gt; &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;,
	&#039;lang&#039; =&gt; &#039;English&#039;,
	&#039;SITE_URL&#039; =&gt; &#039;https://im4change.in/&#039;,
	&#039;site_title&#039; =&gt; &#039;im4change&#039;,
	&#039;adminprix&#039; =&gt; &#039;admin&#039;
]
$article_current = object(App\Model\Entity\Article) {

	&#039;id&#039; =&gt; (int) 18479,
	&#039;title&#039; =&gt; &#039;Towards a secure retirement-Renuka Sane&#039;,
	&#039;subheading&#039; =&gt; &#039;&#039;,
	&#039;description&#039; =&gt; &#039;&lt;div style=&quot;text-align: justify&quot;&gt;
-The Indian Express
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;br /&gt;
&lt;/div&gt;
&lt;div style=&quot;text-align: justify&quot;&gt;
&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;
&lt;/div&gt;&#039;,
	&#039;credit_writer&#039; =&gt; &#039;The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0&#039;,
	&#039;article_img&#039; =&gt; &#039;&#039;,
	&#039;article_img_thumb&#039; =&gt; &#039;&#039;,
	&#039;status&#039; =&gt; (int) 1,
	&#039;show_on_home&#039; =&gt; (int) 1,
	&#039;lang&#039; =&gt; &#039;EN&#039;,
	&#039;category_id&#039; =&gt; (int) 16,
	&#039;tag_keyword&#039; =&gt; &#039;&#039;,
	&#039;seo_url&#039; =&gt; &#039;towards-a-secure-retirement-renuka-sane-18611&#039;,
	&#039;meta_title&#039; =&gt; null,
	&#039;meta_keywords&#039; =&gt; null,
	&#039;meta_description&#039; =&gt; null,
	&#039;noindex&#039; =&gt; (int) 0,
	&#039;publish_date&#039; =&gt; object(Cake\I18n\FrozenDate) {},
	&#039;most_visit_section_id&#039; =&gt; null,
	&#039;article_big_img&#039; =&gt; null,
	&#039;liveid&#039; =&gt; (int) 18611,
	&#039;created&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;modified&#039; =&gt; object(Cake\I18n\FrozenTime) {},
	&#039;edate&#039; =&gt; &#039;&#039;,
	&#039;tags&#039; =&gt; [
		(int) 0 =&gt; object(Cake\ORM\Entity) {},
		(int) 1 =&gt; object(Cake\ORM\Entity) {},
		(int) 2 =&gt; object(Cake\ORM\Entity) {},
		(int) 3 =&gt; object(Cake\ORM\Entity) {}
	],
	&#039;category&#039; =&gt; object(App\Model\Entity\Category) {},
	&#039;[new]&#039; =&gt; false,
	&#039;[accessible]&#039; =&gt; [
		&#039;*&#039; =&gt; true,
		&#039;id&#039; =&gt; false
	],
	&#039;[dirty]&#039; =&gt; [],
	&#039;[original]&#039; =&gt; [],
	&#039;[virtual]&#039; =&gt; [],
	&#039;[hasErrors]&#039; =&gt; false,
	&#039;[errors]&#039; =&gt; [],
	&#039;[invalid]&#039; =&gt; [],
	&#039;[repository]&#039; =&gt; &#039;Articles&#039;

}
$articleid = (int) 18479
$metaTitle = &#039;LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane&#039;
$metaKeywords = &#039;Social Security,Labour,Pension,Old Age Pension&#039;
$metaDesc = &#039;
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per...&#039;
$disp = &#039;&lt;div style=&quot;text-align: justify&quot;&gt;-The Indian Express&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;Increasing provident fund contributions within a faulty system is not the answer&lt;/em&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&amp;rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&amp;rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;The EPFO suffers from poor record-keeping and portability. In today&amp;rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;br /&gt;&lt;/div&gt;&lt;div style=&quot;text-align: justify&quot;&gt;&lt;em&gt;The writer is a research economist at the Indira Gandhi Institute of Development Research.&amp;nbsp;&lt;/em&gt;&lt;/div&gt;&#039;
$lang = &#039;English&#039;
$SITE_URL = &#039;https://im4change.in/&#039;
$site_title = &#039;im4change&#039;
$adminprix = &#039;admin&#039;</pre><pre class="stack-trace">include - APP/Template/Layout/printlayout.ctp, line 8
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1413
Cake\View\View::_render() - CORE/src/View/View.php, line 1374
Cake\View\View::renderLayout() - CORE/src/View/View.php, line 927
Cake\View\View::render() - CORE/src/View/View.php, line 885
Cake\Controller\Controller::render() - CORE/src/Controller/Controller.php, line 791
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 126
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51</pre></div></pre>latest-news-updates/towards-a-secure-retirement-renuka-sane-18611.html"/>
    <meta http-equiv="Content-Type" content="text/html; charset=utf-8"/>
    <link href="https://im4change.in/css/control.css" rel="stylesheet" type="text/css"
          media="all"/>
    <title>LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane | Im4change.org</title>
    <meta name="description" content="
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per..."/>
    <script src="https://im4change.in/js/jquery-1.10.2.js"></script>
    <script type="text/javascript" src="https://im4change.in/js/jquery-migrate.min.js"></script>
    <script language="javascript" type="text/javascript">

        $(document).ready(function () {
            var img = $("img")[0]; // Get my img elem
            var pic_real_width, pic_real_height;
            $("<img/>") // Make in memory copy of image to avoid css issues
                .attr("src", $(img).attr("src"))
                .load(function () {
                    pic_real_width = this.width;   // Note: $(this).width() will not
                    pic_real_height = this.height; // work for in memory images.
                });
        });
    </script>
    <style type="text/css">
        @media screen {
            div.divFooter {
                display: block;
            }
        }

        @media print {
            .printbutton {
                display: none !important;
            }
        }
    </style>
</head>
<body>
<table cellpadding="0" cellspacing="0" border="0" width="98%" align="center">
    <tr>
        <td class="top_bg">
            <div class="divFooter">
                <img src="https://im4change.in/images/logo1.jpg" height="59" border="0"
                     alt="Resource centre on India's rural distress" style="padding-top:14px;"/>
            </div>

        </td>
    </tr>
    <tr>
        <td id="topspace">&nbsp;</td>
    </tr>

    <tr id="topspace">
        <td>&nbsp;</td>
    </tr>
    <tr>
        <td height="50" style="border-bottom:1px solid #000; padding-top:10px;" class="printbutton">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>

    <tr>
        <td width="100%">
            <h1 class="news_headlines" style="font-style:normal">
                <strong>Towards a secure retirement-Renuka Sane</strong></h1>
        </td>
    </tr>
    <tr>
        <td width="100%" style="font-family:Arial, 'Segoe Script', 'Segoe UI', sans-serif, serif"><font size="3">
                <div style="text-align: justify">-The Indian Express</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>Increasing provident fund contributions within a faulty system is not the answer</em></div><div style="text-align: justify"><br /></div><div style="text-align: justify">The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em></div>               </font>
        </td>
    </tr>
    <tr>
        <td>&nbsp;</td>
    </tr>

    <tr>
        <td height="50" style="border-top:1px solid #000; border-bottom:1px solid #000;padding-top:10px;">
            <form><input type="button" value=" Print this page "
                         onclick="window.print();return false;"/></form>
        </td>
    </tr>
</table></body>
</html>'

}
$cookies = []
$values = [
	(int) 0 => 'text/html; charset=UTF-8'
]
$name = 'Content-Type'
$first = true
$value = 'text/html; charset=UTF-8'
header - [internal], line ??
Cake\Http\ResponseEmitter::emitHeaders() - CORE/src/Http/ResponseEmitter.php, line 181
Cake\Http\ResponseEmitter::emit() - CORE/src/Http/ResponseEmitter.php, line 55
Cake\Http\Server::emit() - CORE/src/Http/Server.php, line 141
[main] - ROOT/webroot/index.php, line 39

<head>

    <link rel="canonical" href="<?php echo Configure::read('SITE_URL'); ?><?php echo $urlPrefix;?><?php echo $article_current->category->slug; ?>/<?php echo $article_current->seo_url; ?>.html"/>

    <meta http-equiv="Content-Type" content="text/html; charset=utf-8"/>

$viewFile = '/home/brlfuser/public_html/src/Template/Layout/printlayout.ctp'
$dataForView = [
	'article_current' => object(App\Model\Entity\Article) {

		'id' => (int) 18479,
		'title' => 'Towards a secure retirement-Renuka Sane',
		'subheading' => '',
		'description' => '<div style="text-align: justify">
-The Indian Express
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
<em>Increasing provident fund contributions within a faulty system is not the answer</em>
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
<em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em>
</div>',
		'credit_writer' => 'The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0',
		'article_img' => '',
		'article_img_thumb' => '',
		'status' => (int) 1,
		'show_on_home' => (int) 1,
		'lang' => 'EN',
		'category_id' => (int) 16,
		'tag_keyword' => '',
		'seo_url' => 'towards-a-secure-retirement-renuka-sane-18611',
		'meta_title' => null,
		'meta_keywords' => null,
		'meta_description' => null,
		'noindex' => (int) 0,
		'publish_date' => object(Cake\I18n\FrozenDate) {},
		'most_visit_section_id' => null,
		'article_big_img' => null,
		'liveid' => (int) 18611,
		'created' => object(Cake\I18n\FrozenTime) {},
		'modified' => object(Cake\I18n\FrozenTime) {},
		'edate' => '',
		'tags' => [
			[maximum depth reached]
		],
		'category' => object(App\Model\Entity\Category) {},
		'[new]' => false,
		'[accessible]' => [
			[maximum depth reached]
		],
		'[dirty]' => [[maximum depth reached]],
		'[original]' => [[maximum depth reached]],
		'[virtual]' => [[maximum depth reached]],
		'[hasErrors]' => false,
		'[errors]' => [[maximum depth reached]],
		'[invalid]' => [[maximum depth reached]],
		'[repository]' => 'Articles'
	
	},
	'articleid' => (int) 18479,
	'metaTitle' => 'LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane',
	'metaKeywords' => 'Social Security,Labour,Pension,Old Age Pension',
	'metaDesc' => '
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per...',
	'disp' => '<div style="text-align: justify">-The Indian Express</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>Increasing provident fund contributions within a faulty system is not the answer</em></div><div style="text-align: justify"><br /></div><div style="text-align: justify">The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em></div>',
	'lang' => 'English',
	'SITE_URL' => 'https://im4change.in/',
	'site_title' => 'im4change',
	'adminprix' => 'admin'
]
$article_current = object(App\Model\Entity\Article) {

	'id' => (int) 18479,
	'title' => 'Towards a secure retirement-Renuka Sane',
	'subheading' => '',
	'description' => '<div style="text-align: justify">
-The Indian Express
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
<em>Increasing provident fund contributions within a faulty system is not the answer</em>
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.
</div>
<div style="text-align: justify">
<br />
</div>
<div style="text-align: justify">
<em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em>
</div>',
	'credit_writer' => 'The Indian Express, 17 December, 2012, http://www.indianexpress.com/news/towards-a-secure-retirement/1046251/0',
	'article_img' => '',
	'article_img_thumb' => '',
	'status' => (int) 1,
	'show_on_home' => (int) 1,
	'lang' => 'EN',
	'category_id' => (int) 16,
	'tag_keyword' => '',
	'seo_url' => 'towards-a-secure-retirement-renuka-sane-18611',
	'meta_title' => null,
	'meta_keywords' => null,
	'meta_description' => null,
	'noindex' => (int) 0,
	'publish_date' => object(Cake\I18n\FrozenDate) {},
	'most_visit_section_id' => null,
	'article_big_img' => null,
	'liveid' => (int) 18611,
	'created' => object(Cake\I18n\FrozenTime) {},
	'modified' => object(Cake\I18n\FrozenTime) {},
	'edate' => '',
	'tags' => [
		(int) 0 => object(Cake\ORM\Entity) {},
		(int) 1 => object(Cake\ORM\Entity) {},
		(int) 2 => object(Cake\ORM\Entity) {},
		(int) 3 => object(Cake\ORM\Entity) {}
	],
	'category' => object(App\Model\Entity\Category) {},
	'[new]' => false,
	'[accessible]' => [
		'*' => true,
		'id' => false
	],
	'[dirty]' => [],
	'[original]' => [],
	'[virtual]' => [],
	'[hasErrors]' => false,
	'[errors]' => [],
	'[invalid]' => [],
	'[repository]' => 'Articles'

}
$articleid = (int) 18479
$metaTitle = 'LATEST NEWS UPDATES | Towards a secure retirement-Renuka Sane'
$metaKeywords = 'Social Security,Labour,Pension,Old Age Pension'
$metaDesc = '
-The Indian Express





Increasing provident fund contributions within a faulty system is not the answer





The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per...'
$disp = '<div style="text-align: justify">-The Indian Express</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>Increasing provident fund contributions within a faulty system is not the answer</em></div><div style="text-align: justify"><br /></div><div style="text-align: justify">The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual&rsquo;s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual&rsquo;s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">The EPFO suffers from poor record-keeping and portability. In today&rsquo;s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme.</div><div style="text-align: justify"><br /></div><div style="text-align: justify">Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life.</div><div style="text-align: justify"><br /></div><div style="text-align: justify"><em>The writer is a research economist at the Indira Gandhi Institute of Development Research.&nbsp;</em></div>'
$lang = 'English'
$SITE_URL = 'https://im4change.in/'
$site_title = 'im4change'
$adminprix = 'admin'

include - APP/Template/Layout/printlayout.ctp, line 8
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1413
Cake\View\View::_render() - CORE/src/View/View.php, line 1374
Cake\View\View::renderLayout() - CORE/src/View/View.php, line 927
Cake\View\View::render() - CORE/src/View/View.php, line 885
Cake\Controller\Controller::render() - CORE/src/Controller/Controller.php, line 791
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 126
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51

Towards a secure retirement-Renuka Sane

-The Indian Express Increasing provident fund contributions within a faulty system is not the answer The Employees Provident Fund Organisation (EPFO) is moving towards increasing the mandatory contributions made towards an individual’s provident fund (PF). Contributions to the PF are 24 per cent of basic wages. Earlier, employers would exclude allowances such as the housing allowance (HRA) to make the basic wage look smaller, and pay lower amounts. If the EPFO has its way, all sub-components of wages, except specific exclusions, will now be used to calculate the value of contributions, making the total greater. In theory, this is a welcome step. Individuals are usually myopic about saving for old age, and mandatory contributions help build up a retirement corpus. In practice, even if there was complete clarity about which sub-components of the wage get excluded and which do not, there is one problem: the EPFO itself. Increasing contributions would not be as big a concern if the system worked well. Today, it does not. First, there is the problem of choice. Not only is the EPFO locking 24 per cent of an individual’s wage into a provident fund when a part of it could have been invested in instruments of her choice, but also not providing her with a choice of avenues within the provident fund set-up. The EPFO is required to invest its corpus into a set of specific instruments, mostly government securities and corporate bonds, and individual members have no say on where their own money should get invested. Larger contributions would only mean greater funds for the government, and not necessarily a greater corpus for members. Younger members of the EPFO may actually have the risk-appetite for equities, and may want to benefit from the upside till such time as they can. The EPFO could have been the avenue through which a large number of people are given the option to access the stock market, but it is not. A contribution rate as high as 24 per cent of the entire wage may also end up crowding out private savings. If increasing contributions implies that members have lower private savings, they may resort to withdrawing from their provident fund accounts to finance events in their working life. Early withdrawals are already a problem, and may get exacerbated as more money gets deposited with the new rule change. If most members withdraw from their retirement corpus for reasons that have very little to do with old age, the point of a provident fund system, and increase in contributions, is defeated. The EPFO suffers from poor record-keeping and portability. In today’s economy, members frequently change jobs, or move across locations, and frequently lose track of accounts opened at previous workplaces. Accounts need to be closed at older workplaces, and opened at new ones. Pouring down contributions into a system without centralised record-keeping and portability seems to not be the most efficient method of providing old-age income security. Finally, the EPFO diverts 8.33 per cent of the contributions towards a defined-benefit scheme called the Employees Pension Scheme (EPS). Much has been written about the deficit of the EPS, and some part of the increased contributions will no doubt go towards bridging the funding gap. This will at best make the deficit go down temporarily, but does not solve the deeper design issues of the scheme, or make members any less vulnerable to the possibility of the EPFO reneging on its EPS obligations. If the EPFO is keen on encouraging individuals to build a retirement corpus, then it should look towards the New Pension System (NPS) regulated by the Pension Fund Regulatory Development Authority (PFRDA). While the NPS also falls short of its initial design principles, it does slightly better in offering members choice of investments (though limited), larger equity exposure, and full portability of accounts. The EPFO could provide its members the option to invest their money in the funds offered by the NPS, thus serving as a point-of-presence, like the accounting departments of Central and state governments, that direct their employee contributions to the NPS. Ultimately, the goal of policy should be to encourage and enable individuals to save for old age. This is best done with a system that is easily accessible, provides investment choice, is low-cost, and allows portability across occupations and locations. In a country like India, which has a large informal sector, mandating contributions, or providing tax-breaks, can only affect the formal-sector workforce. To encourage the informal sector to save would require a very different combination of products, infrastructure and intermediaries. One initiative is the NPS-Swavalamban scheme that provides a matched contribution by the government, and uses a network of financial services firms and NGOs to reach out to those usually excluded from formal finance. Little is known, however, about the success of the Swavalamban scheme. Increasing mandatory contributions towards an inefficient system like the EPFO is not the way to prepare a country for providing old-age income security. The EPFO will provide a greater service by being the channel through which its members can connect to a more modern pension system. The finance ministry and the PFRDA will provide a greater service by strengthening the original design principles of the NPS and plugging loopholes that make the NPS Swavalamban more efficient, such that the NPS becomes the one-stop pension shop for Indians from all walks of life. The writer is a research economist at the Indira Gandhi Institute of Development Research.