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1. Pension Fund Market – India
Pension Fund Market India
September 2011

2. Executive Summary
 Indian pension market is still at a nascent stage with low coverage ratio and huge scope for growth
 Pension fund market was valued at INR x tr in 20‐‐ and is estimated to grow to INR y tr by 20‐‐
Market  Currently, only around a mn of India’s b mn strong workforce has access to old‐age income protection
 Increasing participation of global funds in the Indian market leaves a lot of scope for the domestic market to
gp p g p
leverage on them and develop strongly
Drivers Challenges
– Low existing coverage – Structural flaws in pension systems
Drivers & – Changing demographic pattern
g g g p p – Lack of flexibility in pension systems
y p y
Challenges – Higher savings rate – Burden on government finances
– Support to private and foreign players
– Increasing investment potential
 Employees’ Provident Fund Organisation (EPFO)
Employees Provident Fund Organisation (EPFO)
 Project OASIS
Government  High Level Expert Group (HLEG)
Participation  Pension Fund Regulatory and Development Authority (PFRDA)
 New Pension Scheme (NPS)
 Expected Developments
Major Players
Co pet t o
Competition Player 1 Player 2 Player 3
Player 4 Player 5 Player 6
PENSION FUND MARKET IN INDIA 2011.PPT 2

3. Pension schemes of various types have existed in India and
more prominent ones are being developed now
Pension Systems in India
Pillar I Schemes Pillar II Schemes Pillar III Schemes
Civil Service Pension System (CSPS) Employees’ Provident Fund (EPF) Public Provident Fund (PPF)
• Covers the salaried workforce • Establishments with b or more
under government employment, employees can subscribe to EPF • In the absence of mandatory
h b f
both at the central and state • Benefits available in old age pension plans for the
level depend on the contributions and unorganized sector, GoI
• Entire pension obligation is interest, paid as a lump sum introduced PPF in 19‐‐ for
charged to the government and • EPF funds are required to be
workers to accumulate savings
employees do not have to make
employees do not have to make invested in accordance with GoI s
invested in accordance with GoI’s
stipulated investment pattern for their retirement
any contributions
• It is open to subscription for all
citizens on a voluntary basis
National Old Age Pension (NOAP) Employees’ Pension Scheme (EPS) • Members of the PPF can
contribute between INR e and
• In 19‐‐, GOI introduced this old‐ • EPS is a publicly managed INR f each year into their PPF
age poverty alleviation program monthly pension scheme accounts
under the aegis of the NSAP • Part of EPF is diverted toward the • Fund matures in g years and are
• Mainly aims to provide monthly EPS while GoI contributes c% extendable by five years at a
pension to a% of the poorest • Upto half of the average of last d
stretch
elderly citizens
ld l i i months’ salary is compensated
th ’ l i t d
Source:
PENSION FUND MARKET IN INDIA 2011.PPT 3

4. Pension fund market in India is still at a nascent stage and
has huge potential to grow
Pension Fund Market – Overview Pension Fund Market – Growth
• Indian pension market is still at a nascent stage with
INR tr
low coverage ratio
• As pension is a low margin and high volume business, X%
a large population is an appealing market
• India with its massive workforce in the unorganized
sector provides a huge untapped market for pensions
• Strong opportunity for the private players also exists 0
in this market 2010 2025e
Pension Premium – Overview Pension Premium – Growth
• Growth of pension premium was much more than
that of the total life insurance premium in 20‐‐ INR bn
• In 20‐‐, pension premium grew at a% as compared to
life insurance premium growth of b% Y%
• Percentage of pension in total premium, including
insurance premium, went up from c% in 20‐‐ to d% in
20‐‐
• Percentage of pension in total number of policies,
including insurance policies, has also gone up from
including insurance policies has also gone up from 0
e% in 20‐‐ to f% in 20‐‐ 2006 2009
Source:
PENSION FUND MARKET IN INDIA 2011.PPT 4

5. Drivers & Challenges – Summary
Drivers Challenges
Low existing coverage Structural flaws in pension systems
Changing demographic pattern Lack of flexibility in pension systems
Higher savings rate Burden on government finances
Support to private and foreign players
Increasing investment potential
PENSION FUND MARKET IN INDIA 2011.PPT 5

6. Government Participation – Summary
Employees’ Provident Fund Organisation
Project OASIS
High Level Expert Group (HLEG)
Key
Initiatives
`
Pension Fund Regulatory and Development Authority (PFRDA)
New Pension Scheme (NPS)
Expected Developments
PENSION FUND MARKET IN INDIA 2011.PPT 6

7. Players in the Market (x/y)
Company Snapshot: Player
Corporate Information Financial Performance
Headquarters ABC City
ABC City Total Revenue
Net Profit INR bn
INR bn
Founded ‐‐‐‐
0
Products Product 1, Product 2
Key People Z – President
0
2006 2007 2008 2009
Business Highlights
• Player is a joint venture between XYZ and PQR, the leading provider of financial services in the UK
 Player 1 holds j% and Player 2 holds l% of equity in the joint venture
• Has one of the widest reaches among new insurance companies with k branches servicing customer needs in over n
cities and towns
cities and towns
• Plans to raise funds through an initial public offering (IPO) of m% of its current capital base by the end 20‐‐
Source:
PENSION FUND MARKET IN INDIA 2011.PPT 7

8. Thank you for the attention
The Pension Fund Market ‐ India report is part of Research on India’s Financial Services Series.
For more detailed information or customized research requirements please contact:
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PENSION FUND MARKET IN INDIA 2011.PPT 8