Micro pensions in India

India, February 16, 2016

Aegon is helping India’s working poor avoid the old-age poverty trap. Micro pensions, designed to help people prepare for when they are too old and frail to work is, in fact, something of a ‘big deal’.

The name 'micro pensions' is a bit of a misnomer. There's nothing small scale about a project that exceeds its goal of reaching 25,000 people two years early. The micro pension pilot in India's southern Madurai region was launched in 2011 and has seen 28,000 people sign up, each saving just over one euro (100 rupees) per month. It's a small sum, but, it can help to make the difference between secure old age and serious deprivation.

A group of people who have joined the micro pension scheme waiving at the camera

Through its involvement with SDMO, the Foundation for Sustainable Micro Pensions in Developing Countries, as well as the Dutch Association of Insurers, the Pension Federation and the Dutch Ministry of Foreign Affairs, Aegon has been making a difference by supporting the pension scheme for the very poor.

The micro pensions program works with local partner the Development of Humane Action (DHAN) Foundation which supports one million families in India. Though not all of its members are in a position to take out even a micro pension, the organization hopes to reach 200,000 members in the next five years.

Giving people a chance

Currently, the Dutch Ministry of Foreign Affairs contributes 50% toward program costs, while the association of insurers and pension funds each pay 25%. In all, around €800,000 has been invested by insurers and pension funds since the program began.

Wim Pols of the Micro Pension Foundation points out, however, that the aim is not just to provide cash, but to give people a chance to build better lives for themselves. "It's a unique public-private cooperation. The business groups, including Aegon, work together to help developing countries to build basic financial services and provide viable options for the poor," he says.

Aegon's Maarten Edixhoven travelled with other members of the program board to India in November last year to see how the project was going. Says Maarten: "This is a project that is unlikely to lead to any business development for Aegon. We're really doing this purely to be a good corporate citizen. For me, as an Aegon employee, it makes me proud to know we are involved."

 Aegon employee on a visit to DHAN, India

The micro pensions are organized through the DHAN foundation, with self-help groups of around 20-50 people. "People hand over their money in cash to a group leader who registers their payment in paper legers and deposits it. Overheads, administration costs and training are limited," says Wim.

The program takes a 'train the trainers' approach and the peer-to-peer element works, he says. "Members of the group tell others about what a pension has done for them. It has given people dignity, they feel they have something for their future, because what the state offers them is very, very little."

Striking inflow rate

Already around 90 people are receiving a pension, or are in the process of receiving one. The pension is a defined contribution product with two options on retiring, either pensioners take a higher pension which ends when they die, or they take a slightly lower pension and the remainder is paid to their family when they die.

Pension contributions can be made from the age of 18, with pay out at 55. Says Wim: "In the west, people are still strong and healthy into their sixties and even seventies, but in India many people have had a life of very hard work and can't physically continue with manual labor."

Although the micro pensions program has concentrated on India so far, there are plans to extend the work to other countries, including Africa.


One of the striking things about the program according to Wim is that there are hardly any drop outs. "This was true to such an extent that we did not believe it at first. We said 'how come there is no outflow of members, just inflow?' – but there is almost a magic to it – people are pension-minded and take the chances offered to them to help themselves and their families break free from poverty."

Future prospects

Paul Everloo from Aegon the Netherlands IT, also travelled to Madurai to attend a summit on micro pensions as one of various Aegon colleagues who contributed to the project with their time, know-how and capabilities. "It was a great experience and a unique development opportunity," he notes.

After the visit to India in November, the SDMO board has decided that the Micro Pensions Foundation will continue to be involved beyond the pilot as DHAN will be scaling up the program.

Although the micro pensions program has concentrated on India so far, there are plans to extend the work to other countries. Aegon's Jaap Turkesteen visited Ghana last year to meet with potential investors and review the feasibility of launching a similar project in that continent.

News alerts from Aegon