Retirement Income Security in India: A Comparative Assessment of the Employees’ Pension Scheme, 1995 and the National Pension System

With the ageing population, declining support from the joint family and the informality of the Indian labour market, financial security in old age has become a major public policy issue. There are currently two types of pension schemes in the organised sector. The Employees’ Pension Scheme, 1995 is a partially funded defined-benefit scheme run by the Employees’ Provident Fund Organisation. On the other hand, the National Pension System is a fully funded market-linked defined-contribution scheme regulated by the Pension Fund Regulatory and Development Authority. This study uses only official secondary data. This includes regulatory handbooks, parliamentary replies, statutory notifications and judicial decisions. A structured comparative study of the two schemes has been conducted on the basis of the following nine analytical dimensions: design philosophy and risk allocation, coverage, contribution architecture, benefit determination and adequacy, investment returns, portability and flexibility, taxation, survivor protection and fiscal sustainability. The analysis shows that Employees’ Pension Scheme, 1995 offers certainty of pension and a minimum amount guaranteed throughout life. However, its benefit adequacy is very low. About three in five pensioners receive a pension of less than Rs 1,500 per month. Along with this, there is also an increase in actuarial stress on the scheme. National Pension System improves the possibility of increasing funds due to portability, transparency and market-linked returns. However, it carries investment risk and longevity risk on the individual. Also, mandatory annuitisation and limited participation in the informal-sector also pose some challenges to this scheme. Unified Pension Scheme was launched in 2025 under the National Pension System. Being an assured-benefit option, it is seen as an attempt to achieve some degree of synergy between these two different pension systems. Illustrative calculations reported in the paper indicate that, at the statutory wage ceiling and full contribution density, EPS 1995 replaces about 50 per cent of ceiling wages after 35 years of service but only about 25 per cent of an actual wage of Rs 30,000, and that the Rs 1,000 statutory minimum pension has lost roughly two-fifths of its real value since 2014. The study concludes that neither scheme alone ensures adequate and long-term sustainable retirement income. Therefore, parametric and structural reforms such as indexed floors, rationalised wage ceiling, default life-cycle investing and wider coverage are needed to further strengthen India’s multi-pillar pension system. Because the assessment draws entirely on official secondary data and an interpretive comparative method, and because several official statistics report the National Pension System jointly with the Atal Pension Yojana, the findings are institutional and directional rather than empirical estimates of realised retirement outcomes.

retirement income security, Employees’ Pension Scheme 1995, National Pension System

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