Challenges in Micro pension –Demand side

perspectivesS.Sivanandan, Team leader

DHAN Foundation

It is a defined member contribution product Vesting age – 55 onwards Premium payment directly to LIC through existing SHG

system The premium ranges from minimum of Rs.100 and multiples

of 100 (Max Rs.500) The contributions will earn interest every year and the

floating interest rate to be applied for each financial year At the vesting age, members would choose the type of

pension benefit- either life pension or Life pension with Return of Corpus (ROC)

Pension will be directly credited by LIC only through ECS/NEFT to the bank account of the members, the details of which are to be provided by DHAN.

Micro Pension – Key Product features

Next level graduation product for the members of Kalanjiams (SHG)

Social security product for the old aged Self dependent even at the older age Could earn respect among the family

members Conversion of accumulated savings in to a

worthy product is possible

Why micro pension for poor?

Staff orientation and workshop at periodic intervals with the support of People mutuals

Product introduction at the cluster GBMs and federation board meetings

Interaction with group members on the need and importance of micro pension through appropriate IEC materials thereby building their confidence

Generating applications from the members who wish to join micro pension

Member and policy administration Proposal to LIC with the list of members enrolled

Strategies followed for coverage

Members who wish to join in the micro pension scheme needs to complete the LIC application form along with id proof and 2 photo’s.

The cluster associate sends the completed member application form to LIC and a copy to people Mutuals.

After completion of the application, the federation associate creates the member micro pension passbook.

The cluster associate gives the member micro pensions passbook to the member in the group meeting

The members would make their contributions (payments) in the SHG meeting along with Savings, loan principal, interest on loan and any

other payments

The cluster associate records the transaction and gives the receipt to the member.

Member and Policy administration

The groups’ transaction details (receipt and vouchers) will be submitted by one of the group member (on monthly rotation basis) to the federation office.

The CDAA will verify the receipts and vouchers and give the R/V specific to micro pension to the mutual staff

The mutual staff will prepare the receipt for micro pension paid group

The field associates will verify the payment to the mutuals and their MIS data

The final data will be entered in the excel sheet by the mutual staff

The FC will verify the total amount received from the groups and the amount to be paid to LIC and prepares the cheque

The cheque will get approved in the Federation board for making payment to LIC

LIC will send the official receipt to the federation on receipt of the payment along with the list

Contd..

Micro pension is not an immediate returns oriented product unlike regular savings

Lack of visioning on the pension product in their early productive ages (18-40)

Older age people badly need the product but their accumulation is low and hence lesser pension at the vesting period

Tendency to withdraw the pension amount for life cycle needs (eg., education, marriage, health expenditures etc.,)

Challenges

Thank you