Call it the greying of India. By 2016, the number of Indians above age 60 is expected to exceed 113 million and comprise 8.9 per cent of the population. Further, the proportion of persons above 60 in the total population is expected to rise fairly abnormally owing to advances in medical technology and increasing life spans. Demographic projections suggest that by 2026 the aged will comprise 13.3 per cent of the population. Most of them will be in low-income families.

This has serious implications for social security, particularly given that the traditional and informal systems that provide income security, such as the joint family system in India, are increasingly unable to cope with the enhanced life span and medical costs during old age.

There is thus an urgent need to introduce formal, contributory pension arrangements that can supplement these informal systems. The rag-tag pension system that prevails in India is hopelessly inadequate to address the problem. To address this failing and make recommendations to rectify them, the Ministry of Social Justice and Empowerment commissioned a national project titled OASIS (the Old Age Social and Income Security) and nomimated an eight-member Expert Committee in 1999.

The primary aim of the Oasis report was "to recommend a pension system which enables individuals to attain old age security at the price of modest contribution rates through their working career." The Committee was mandated to make concrete recommendations for actions that the Government of India could take so that "every young worker can build up a stock of wealth through his or her working life, which would serve as a shield against poverty in their old age."

In its report, the Project Oasis committee made bold, radical recommendations to restructure the pension system and align it with the future needs and aspirations of the people. It suggested the introduction of a brand new pension system, based on Individual Retirement Accounts (IRAs). The life-long IRA, unique to an individual, will serve as a repository; an individual can save and accumulate assets through his career, and access his or her account from anywhere in the country.

More important, the pension system envisaged by Project Oasis seeks to empower the individual to decide how the money in his IRA should be managed at different stages of his life; for instance, he can, if he wishes to, move from a high-risk investment profile to a low-risk one. On retiring, an IRA account-holder can buy annuities from annuity providers and derive sustained benefits based on the accumulations in his account.

The Project Oasis report has suggested that six professional fund mangers (PFMs) be chosen to take charge of the pension fund management business in the country. Individuals can opt for any one of the fund managers and also move from one PFM to the other, if need be. The cost of fund management to the individual would be around 0.15 per cent per annum in fees and expenses.

The report gives considerable attention to the provision in the existing pension systems that permits premature withdrawals, and notes that such a facility defeats the very purpose of providing for old age. However, it also acknowledges that a system that does not provide premature withdrawal facility would be highly unpopular in a country like India, where a large section of the people have little or no savings and credit. It therefore recommends that a micro-credit facility be integrated into the system. Individuals can access funds in the form of loans against their pension savings.

The report critiques the functioning of the EPF, EPS, PPF and other schemes and recommends a series of steps to banish inefficieny of fund management and improve the returns on investment.

The Project Oasis report makes the most revolutionary recommendations on pension reforms. To millions of Indians who will traverse the desert sands of old age without income security and who have been deluded by mirages in the past, the Oasis report, if implemented, holds of hope of bountiful greens. If it ever sees the light of the day.

Click here to read this voluminous report.