A Pension Scheme that's Maid in India

This September, A Mary, 47, got something she never thought she ever could -not a car or a home but a pension. A house help and a mother of two whose husband is a driver, Delhi-based Mary al ways viewed a pension as something only the affluent could afford -until her employer Kurt Strasser, a senior sector specialist at German development bank KfW, brought it within her reach.

Mary is a beneficiary of the Micro Pension Foundation's Gift-a-Pension initiative. Every month, Strasser gives her Rs.500 extra cash as part of her salary that she deposits in her pension account via one of the 2.5 lakh designated outlets.

The Micro Pension Foundation has tie-ups with companies such as Eko, ItzCash and PayWorld, and when Mary deposits the money at one of these outlets, it gets credited instantly, with an SMS confirmation. "Old-age care is a challenge facing India. Gift-a-Pension is an excellent initiative to make a pension product accessible to low income Indians," says Strasser.

At a time when the government is laying a thrust on financial inclusion, Gift-a-Pension demonstrates an efficient mechanism to deliver a financial product to India's poor. "It is a great initiative. No financial product today in India addresses this segment. High transaction costs for low-value products are a big deterrent. Micro Pension Foundation has done something that was difficult to do," says YSP Thorat, a former chairman of National Bank for Agriculture and Rural Development and a board member of Micro Pension Foundation.

Gift-a-Pension is targeted at over 35 million domestic workers (maids, cooks, cleaners, drivers and the like) who earn enough to make ends meet but not enough to create a financial cushion for the autumns and winters of their lives.Whilst the facilitators of the scheme are employers, they don't need to worry about being weighed down by the scheme's financial and logistical burden.

The key role of the employers is at the beginning -understanding and explaining the product details and enabling online enrollment.Their co-contribution to the pension account is optional. And the product is structured such that illiterate workers can easily manage it even as they change employers and switch cities (see Fast Facts).

Sound Start

Launched in September, the response has been encouraging with over 1,000 employers registering so far. Over 350 have gifted a pension to their domestic help. Most of the enrollments are from Delhi National Capital Region (91%), with Bengaluru (5%) and Mumbai (4%) bringing in the rest, says Parul Khanna, associate director, Micro Pension Foundation. Most of the beneficiaries are maids (45%), followed by drivers (27%) and cooks (13%). So far, almost half of the enrollments have been made using Aadhaar as proof of identity. Over 70% prefer monthly saving and 38% are putting away over `500 monthly into their pension account. About 10% of the employers have also set up a systematic investment on their credit cards for automatic deductions. "I have enrolled my maid of eight years. I helped her enroll and paid the `300 sign-up fee. Now, she takes care of it," says Mumbai-based Sonali MehtaRao, co-founder, MelaArtisans.com.

The Gift-a-Pension scheme has a helpline that is open from 8.30 am to 6.40 pm on all working days, with a staff of 20 in Pune and Bengaluru that can take queries in 14 regional languages.

The man behind Gift-a-Pension is Gautam Bhardwaj, director of Micro Pension Foundation, for whom the scheme has been a gleam in the eye since 1990. The think-tank he founded, Invest India Economic Foundation, was the main architect of the National Pension System (NPS), which was rolled out by the government in 2004 for its workers. For the next five years, he worked with the government to open up NPS for all.

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A Pension Scheme that's Maid in India