UTI Launches Micro Pension Fund

Invest India Micro Pension Services (IIMPS) and UTI Asset Management Company (AMC) on Wednesday announced a new strategic partnership with the BASIX Group, a livelihood promotion group working with over 1.5 million poor – 90 per cent of whom are rural poor households and about 10 per cent urban slum dwellers. Under this partnership, IIMPS will use its proprietary Micro-PensionTM Model to deliver the UTI-Retirement Benefit Pension Fund (UTI-RBPF) to BASIX customers. In 2009- 10, this partnership will target 700,000 working poor, most of whom are women living in 10,000 villages of Andhra Pradesh, Karnataka, Bihar, Orissa, Jharkhand, Maharashtra, Madhya Pradesh, Tamilnadu, Rajasthan, Chattisgarh, West Bengal, Delhi, Uttarakhand, Sikkim and Assam, officials said at a news conference in Mumbai. IIMPS is promoted jointly by SEWA Bank, UTI AMC and leading pension and development sector experts to provide a low-cost, secure and scalable mechanism to the working poor to save for their old age.

Already, IIMPS and UTI AMC are reaching low-income workers in collaboration with leading cooperatives, micro-finance institutions (MFIs), non-government organisations (NGOs), worker associations and community-based organisations in multiple states. Their first partnership using the IIMPS Micro-PensionTM Model was launched on April 12, 2006 jointly with SEWA Bank. Over 40,000 poor women including street vendors, rag-pickers, head-loaders and other self-employed women have since been saving for their old age under this scheme.

U K Sinha, chairman and managing director of UTI AMC said that micro-pensions can play a key role in bridging India's pension coverage gap. According to Sinha, this joint initiative by UTI AMC and IIMPS complements the larger policy and regulatory efforts in delivering sustainable retirement solutions to the working poor, most of whom have been excluded by formal finance as well as formal pension and provident fund schemes.

Since its inception in 2006, IIMPS has enabled over 100,000 working poor to save for their old age in collaboration with UTI AMC. The savings of these low-income workers flow to the UTI-RBPF, a Government of India Notified Pension Scheme managed by UTI AMC and regulated by the Securities and Exchange Board of India (Sebi). This scheme has provided a compounded annualised return of over 11.09 per cent since inception.

According to the latest Invest India Dataworks Survey, around 143 million workers in India earn less than Rs 36,000 (US$800) per year. Nearly all of them are excluded from formal pension arrangements. Of these, 61 million workers are interested in saving for their old age and can afford an annual average pension savings of Rs 3,300.