India’s workforce is predominantly made up of informal sector workers, including small traders and self-employed individuals. These groups often lack access to social security, especially in their old age. To address this gap, the Government of India introduced the National Pension Scheme for Traders and the Self-employed Persons (NPS-Traders) in 2019. This voluntary and contributory pension scheme aims to provide financial stability and social security to those who operate outside the formal employment sector.
Overview of the Scheme
The NPS for Traders and Self-employed Persons is a central government initiative launched by the Ministry of Labour and Employment. The scheme targets small-scale traders, shopkeepers, and self-employed persons who are not covered under any existing pension scheme like EPFO or ESIC.
Under this scheme, eligible beneficiaries receive a minimum assured pension of ₹3,000 per month after attaining the age of 60. The government matches the subscriber’s monthly contribution in a 1:1 ratio, making it a co-contributory pension scheme.
Eligibility Criteria
To enroll in the NPS-Traders scheme, the applicant must fulfill the following conditions:
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Age: Between 18 and 40 years at the time of joining the scheme.
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Income: Annual turnover should not exceed ₹1.5 crore.
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Occupation: Should be a self-employed person or small trader (e.g., shopkeepers, rickshaw pullers, hawkers, owners of small retail shops).
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Exclusion: The applicant should not be a member of EPFO, ESIC, or any other government-run social security scheme. Also, income taxpayers are not eligible.
Contribution Structure
The monthly contribution depends on the age at which the person joins the scheme. For instance:
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If a person joins at the age of 18, they will contribute ₹55 per month.
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If they join at 40, the monthly contribution would be ₹200 per month.
The central government contributes an equal amount to the subscriber’s pension account. Contributions are made till the subscriber reaches 60 years of age.
Enrollment Process
The enrollment process is straightforward and technology-driven:
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Interested individuals can visit the nearest Common Service Centre (CSC).
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Provide Aadhaar number and bank account details.
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Complete biometric authentication.
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Fill out a self-declaration form regarding eligibility.
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On successful verification, a pension account number (Pradhan Mantri Laghu Vyapari Maan-Dhan Yojana account) is created.
The Life Insurance Corporation of India (LIC) serves as the pension fund manager for this scheme.
Benefits of the Scheme
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Social Security for the Informal Sector: This scheme provides a safety net for traders and self-employed individuals who otherwise have no post-retirement financial support.
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Government Contribution: Matching contributions from the government encourage savings and increase the pension corpus.
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Simple and Transparent: Easy enrollment through CSCs and biometric verification ensures transparency and convenience.
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Family Support: In case the subscriber dies before age 60, the spouse can either continue the scheme or exit with the accumulated corpus. After the subscriber’s death post-retirement, the spouse receives 50% of the pension as a family pension.
Challenges and Criticism
Despite its good intentions, the NPS for Traders has seen limited uptake. Some reasons include:
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Lack of awareness among target beneficiaries.
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Irregular income of self-employed persons, making consistent contributions difficult.
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Skepticism about government schemes due to past inconsistencies or bureaucratic hurdles.
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Exclusion of income taxpayers, which rules out many middle-class self-employed individuals.
Way Forward
To increase the impact of the NPS-Traders scheme, the government must focus on:
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Spreading awareness through digital and grassroots campaigns.
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Providing incentives for regular contributions.
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Simplifying procedures and reducing documentation further.
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Introducing flexibility in contributions to accommodate irregular income patterns.
Conclusion
The National Pension Scheme for Traders and the Self-employed Persons is a commendable effort by the Indian government to include the informal sector in the social security net. While it has the potential to transform the lives of millions of small traders and self-employed workers, its success hinges on widespread awareness, effective implementation, and adaptability to the needs of its target beneficiaries. With improved outreach and participation, the NPS-Traders scheme can become a cornerstone of India’s inclusive development agenda.
