India’s pension system has a blind spot: those already old
India's pension reform has quietly become one of the most sophisticated in the developing world. The National Pension System (NPS) now runs on shared digital rails that allow the Pension Fund Regulatory and Development Authority (PFRDA) to launch a new product within months. Its recent wave of initiatives, including child accounts, a simplified variant for informal workers and phased withdrawals at retirement, shows a system iterating faster than almost any peer. But there is one group even the best accumulation machine cannot help: those already old.
For a 55-year-old informal worker, compounding has almost nothing to work with. Even if she enrolled tomorrow and saved faithfully, there would be too few years to build a pension worth the name. No payout innovation can manufacture adequacy that the accumulation phase never created. The near-old need a different instrument: not a miracle, but a way to convert what they already own into income.
And most of them do own something substantial: their homes. Eighteen years ago, drawing on the Indian Retirement and Savings Survey 2007, I estimated that tens of millions of informal workers over 50 owned their houses outright. These unencumbered assets were then worth well over ₹17 trillion, or roughly a third of GDP in 2008. Many of these workers are now in retirement, still asset-rich and cash-poor, while the wealth in their walls has only appreciated. A reverse mortgage, which provides monthly income against a home the owner continues to live in, is the natural key to that lock.
Why reverse mortgages failed
Honesty compels the hard part: reverse mortgages have been legal in more than twenty countries for decades but have become mainstream in none. India's own 2007–08 scheme generated only a few thousand loans. The failure modes are well understood: the wish to leave the home to children, the fear of losing it, the longevity and house-price risks that force cautious pricing, the cost of verifying title and succession, and a history of mis-selling that corrodes trust. Any honest advocate must start here.
What has changed is the ground beneath the product. Digitized land records under the Digital India Land Records Modernization Programme (DILRMP) and SVAMITVA, which maps rural homes and issues property cards, are compressing title and succession checks from weeks to days. India's population aged 60 and above will roughly double to about 347 million by 2050, according to UNFPA's India Ageing Report 2023. Meanwhile, the National Housing Bank (NHB), Irdai and PFRDA have matured into capable regulators.
Lessons from abroad
The pieces now exist to reimagine the product around why it failed, and other markets offer useful lessons. The United States turned a failing market around with a government insurance wrapper through its Home Equity Conversion Mortgage (HECM) programme, which absorbs the tail risk lenders cannot. South Korea's housing pension offers a similar model, while Britain rebuilt trust through the Equity Release Council's mandatory advice and cooling-off period.
A workable Indian version could borrow all three ideas and add some of its own: a verified digital property credential to cut lender costs; a state-backed insurance or reinsurance layer so the product can be priced at rates families accept; mandatory conversion of the proceeds into a lifelong monthly income through a life insurer, rather than a lump sum that can be spent or lost; and independent counselling with a cooling-off window to protect borrowers and heirs.
None of this should be rushed. The next step is a small, jointly designed pilot involving NHB, PFRDA, Irdai and the Department of Financial Services, in one or two states with clean land records, to test the economics and build trust before a national rollout.
Making inheritance part of the solution
The design can even turn the strongest Indian objection, the wish to leave the house to one's children, into a feature. A well-built product would let heirs redeem the home by repaying the loan, cap what the lender can claim at the home's value, and ring-fence the rest for the estate. Framed this way, a reverse mortgage is not the surrender of an inheritance but a bridge: it lets parents live with dignity without leaning on children who are often stretched, while passing on whatever equity remains.
The fiscal logic is compelling: unlocking home equity for this cohort is far cheaper than a tax-funded old-age pension for the same millions, and lets people draw on wealth they built rather than wait on the exchequer.
A pension system committed to coverage and adequacy for all cannot write off the generation the accumulation model reached too late. For them, a dignified retirement may already be sitting in their walls, if we finally design the product that lets them live on it.
Gautam Bhardwaj and Parul Seth Khanna are co-founders of Universal Pensions, Singapore.