The long overdue pension reform is finally taking shape. From June 1, 2009 onwards any private individual will be able to start a New Pension System (NPS) account with a designated `Point of Presence' (POP) and start saving up for a pension. Central Government employees who have joined service after January 2004 are also a part of the new pension system. Unlike in the past, in the new design of the new pension system, the POP will be the front end, the National Security Depository Limited (NSDL) will be record keeper, and six entities selected by the Pension Fund Regulatory and Development Authority (PFRDA) will be the fund managers. Under the new system, fund managers will run different plans that comprise equity, government securities and corporate bonds with different combinations of risk and potential returns.

Unlike other leading Asian economies such as China and Japan, India has a rapidly growing young adult population. It is estimated that by the middle of this century, there will be 335 million Indians over the age of 60, more than a fifth of the total population. The average life expectancy is estimated to be around 80 years by 2020. Thus, the average worker will need decent savings to sustain for his retired life. But the current formal pension scheme for government employees, at best, covers only about 13% of the labor force. The rest of the unorganized have no access to any formal pension saving system of old-age economic security. To maintain adequate payments to organized pensioners, it currently costs roughly 2.5% of India's GDP, despite retired government employees constituting less than 1% of population.

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