Posted on May 02, 2012 by Sergio Ulloa
May 1st was International Labour Day, a date that celebrates the contributions and progress made by workers in industrialized nations over the past two hundred years. The occasion was perhaps a fitting time for India to formally announce a new life insurance and pension fund that specifically targets the country's sizeable overseas workforce in a bid to better address their social security and resettlement needs going forward.
The Indian government's Pension and Life Insurance Fund (PLIF) was officially launched by the country's Minister for Overseas Indian Affairs, Vayalar Ravi, at a function held over the holiday period. The scheme looks to fulfill a promise made by Prime Minister Manmohan Singh last January to improve upon India's expatriate benefit framework, and could help the country's millions of overseas workers, especially those now working in Gulf Cooperation Council (GCC) states, invest back in their home country and prepare for their future resettlement and retirement. The low-cost life insurance plan that covers against natural death for the period of time they are abroad is furthermore expected to become a key savings tool for many families while their breadwinner works abroad.
The PLIF scheme has been designed to provide three distinct benefits for India's expatriate community: pension planning, life insurance cover, and resettlement compensation. Any Non-Resident Indian (NRI) or overseas contract worker aged 18 to 50 who want to save for resettlement and retirement through the PLIF program will be eligible with a valid work permit and proper immigration clearance. This stipulation would entail holding an ECR (Emigration Check Required) passport or an active employment contract in an ECR country. While the government wants as many overseas Indians covered as possible, the PLIF scheme will be based on voluntary contributions by expatriate workers. Under the provisions of the PLIF, the Indian government will contribute INR 2,000 (US$40) for every member paying between INR1,000 (US$19) and INR12,000 (US$230) into the fund annually, and female overseas workers will be eligible for a special co-contribution worth an additional INR1,000 (US$19) a year.
When it comes time to collect, the three arms of the PLIF scheme will be managed by three different operators. Pensions will be regulated by India's Pension Fund Regulation and Development Authority (PFRDA), the savings for resettlement will be held in a mutual fund controlled by the Securities and Exchange Board of India (SEBI), and the life insurance requirement will be managed by a dedicated insurance company
. PLIF subscribers can begin to withdraw their savings after five years, capped at 50 percent of their account value. If this occurs, 40 percent of the remaining funds will be paid back as lump sum once the policyholder turns 55, with the rest reserved for a monthly pension. PLIF subscribers who return to India before retirement can maintain their savings account for old age through their bank and the electronic claims system.
In addition to this expatriate pension scheme, The Ministry of Overseas Indian Affairs (MOIA) has also set up an Overseas Workers Resource Centre, which is a 24/7 telephone helpline for Indian emigrants and their relatives if they need information about legal procedures, country-specific risks, and what they should do if things go wrong while abroad. The announcement of this new hotline followed the establishment of the Indian Community Welfare Fund (ICWF) to assist distressed expatriate workers in 2009 and other moves made recently by the MOIA to update their electronic documentation network and generally improve upon the country's strained emigration system.
India's expatriate workforce is growing not only in number but also in political clout, as successive governments try and entice the country's large overseas workforce with initiatives to encourage greater reinvestment back home. It is estimated there are around 25 million Indian citizens currently living and working abroad, an entire nation in and of itself. While other prominent Asian countries like China and the Philippines have been able to reap substantial economic reward from their expatriate workforce through sizable remittances and trade activity, India's emigrant contributions remain muted, and thus the national government is now trying to more actively engage their overseas diasporas in a bid to boost domestic fortunes
Of particular interest are India's expatriates in the Gulf. Indian immigrants make up a considerable proportion of the region's working class, with many moving to the rich Gulf States during the oil boom to work as construction laborers, domestic helpers and in other more specialized fields. The region has been an attractive destination for South Asian migrant labor due to the higher salaries available and the relatively short travel distance to the subcontinent. However as more of Indian workers move east, problems begin to emerge
. Citizenship, permanent residency and other legal rights are seldom granted to immigrants working in these Gulf countries and as a result maintaining affordable access to necessary services like healthcare and retirement planning has become a serious problem for most Indian expats. Added to this now are increased regional security concerns surrounding the aftermath of the Arab Spring revolutions last year.
The moves made to address the expatriate social safety net follow renewed efforts made by India's chief insurance regulator (IRDA) to improve the country's insurance market and encourage the rising number of Indian middle-class consumers to make more proactive insurance and investment decisions. The county's insurance sector has grown
rapidly over the past decade, driven in particular by the popularity of unit-linked life insurance products, which have dominated the market. Since the Indian insurance market was first opened up to the private sector by the Insurance Regulatory and Development Authority Act in 1999, total insurance penetration across the country has nearly doubled, with the local market overtaking several developed economies in terms of premium output in the process. Critical to this growth has been the input from the international insurance industry. Overall, India represents one of the world's fastest growing insurance markets, with rising income levels and growing awareness of risk management amongst the populace expected to drive a substantial demand for cover and investment solutions nationwide. Foreign multinational insurance companies
have played a big part in this development but contributions from the country's tremendous expatriate populace should look to play a large part in this development as well.