Indian Banks should nudge to improve pensions planning for employees

RBI in this notice points  that there has been a change in Payment of Gratuity Act 1972. Under the act, people are eligible for pensions. However, as it happens in most pension cases, people did not choose to opt for the pensions. I am guessing a large% did not choose the pension plan just based on previous such studies.

Under the new amendment these left-out persons will again be allowed to opt for pensions(don’t know the details of from what year and so on). Banks say it will be difficult for them to account for this expenditure in year one. Hence, RBI notice is regarding how banks can amortize the additional expenditure for over five years in their books.

Well, if the act had been amended earlier and default for pensions had been changed to opt-out instead of opt-in, things could have been much better. Even now, the plan is an opt-in plan and asks people to re-enrol in the pension plan. It can be changed to make it an opt-out default instead.

Why leave such important decisions to people who have made the mistake the first time.

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