Pension Coverage in India and the Role of the PFRDA Act

The PFRDA Act charges the Authority not only with regulating pension funds but with promoting old age income security. India's population is ageing, most of its workforce is outside formal employment, and traditional family support is weakening. Measured against this need, pension coverage remains limited, despite significant growth in the NPS and the Atal Pension Yojana. This note examines the coverage picture and the tools the Act provides to expand it.

1. The Need

Ageing: the share of people aged sixty and above is projected to rise from about one in ten today to about one in five by 2050, according to the India Ageing Report 2023 of UNFPA.
Informal workforce: most workers are in the unorganised sector, with irregular incomes and no employer pension.
Longer lives: rising life expectancy lengthens retirement and increases the risk of outliving savings.
Changing families: smaller families and migration reduce the traditional support of the elderly by children.

2. The Present Picture

According to a Government document of May 2026, as of 31 March 2026:

NPS: about 2.17 crore subscribers, with assets under management of about ₹15.95 lakh crore.
Atal Pension Yojana: about 8.96 crore enrolments, with assets of about ₹51,400 crore.
Employees' Pension Scheme: about 7.98 crore contributing members (April 2026).
Social pensions: about 2.92 crore beneficiaries of Central social pension schemes and about 1.41 crore of State schemes (April 2026).
Others: defence and railway pensioners, and Government employees under the old and new systems.

⚠ Note

Enrolment is not the same as adequate coverage. Many APY and NPS accounts receive small or irregular contributions, and social pensions are often only a few hundred or a thousand rupees a month. The real question is how many people will have an adequate income in old age, which is much harder to measure.

3. The Three Pillars

Pillar 0 (social pensions): tax-funded pensions for the elderly poor, such as the Indira Gandhi National Old Age Pension Scheme under the National Social Assistance Programme, supplemented by States.
Pillar 1 and 2 (mandatory and occupational): the EPF and EPS under the Code on Social Security, Government pensions, and the NPS for Government employees.
Pillar 3 (voluntary): the NPS All Citizen and Corporate models, the APY, NPS Vatsalya, and private pension and insurance products.

The PFRDA Act operates mainly in the second and third pillars. Coverage policy, however, requires all pillars to work together, which is why proposals have been made for closer alignment between the EPFO, PFRDA and social pension schemes.

4. Tools in the PFRDA Act for Expanding Coverage

Duty to promote (Section 14(1)): the Authority must promote and ensure orderly growth of the NPS, not merely regulate it.
Education (Section 14(2)(j)): subscriber and public education on retirement savings, funded partly through the Subscriber Education and Protection Fund.
Points of presence (Section 22): wide distribution through banks, post offices and online channels.
Portability (Section 20(2)): one account that follows a worker through formal and informal jobs.
Flexible schemes: the power to approve schemes (Section 14(2)(b)) underpins the Multiple Scheme Framework, including schemes for gig and platform workers.
Low cost: caps on charges keep the system affordable for small savers.

5. Initiatives

APY: guaranteed pension for unorganised workers, continued to 2030-31.
NPS Vatsalya: saving from childhood.
Digital onboarding: eNPS, Aadhaar-based KYC and UPI payments, with PFRDA reported to be targeting a large increase in subscribers through digital channels.
Exit reforms of 2025: greater flexibility at exit to make the NPS more attractive.
Assured payouts: the 2026 expert committee on assured payouts within the NPS.
Gig workers: the Code on Social Security's framework for gig and platform workers, alongside NPS schemes designed for them.

6. Barriers

Low and irregular incomes: many workers cannot commit to regular contributions.
Trust and awareness: limited understanding of pensions and distrust of market-linked products.
Preference for liquidity: locked-in savings compete with immediate needs such as health, education and housing.
Fragmentation: multiple schemes under different ministries and regulators confuse users.
Adequacy: small contributions produce small pensions, which may not meet basic needs.

⚠ Key point

India faces rapid ageing (about one in five aged sixty or more by 2050) with a mostly informal workforce. As of 31 March 2026, the NPS had about 2.17 crore subscribers and ₹15.95 lakh crore AUM, the APY about 8.96 crore enrolments, the EPS about 7.98 crore contributing members, and social pensions about 4.3 crore beneficiaries. The PFRDA Act's tools for coverage include the duty to promote (Section 14(1)), education, points of presence (Section 22), portability and flexible scheme approval. Barriers include low incomes, awareness, liquidity needs, fragmentation and adequacy.

7. Related Topics and Provisions

Object, scope and scheme of the Act
The Atal Pension Yojana
The Multiple Scheme Framework
EPF and the Code on Social Security, 2020
Evaluation of the Act and the way forward