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Business News/ Money / Calculators/  Indians are ready for retirement, but haven’t saved enough
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Indians are ready for retirement, but haven’t saved enough

On an average, Indian employees are on course to achieve only 71% of the income they will need

Sneha Srivastava/MintPremium
Sneha Srivastava/Mint

India ranks first in retirement readiness in a global survey conducted by Aegon Religare Life Insurance Co. Ltd. It ranks ahead of even countries such as the US, the UK and China. The survey, Aegon Retirement Readiness Survey 2015, had 15,000 respondents from 15 countries, out of which 1,000 (900 working and 100 retired) were from India. Indian workers scored 6.98 out of 10 on the Retirement Readiness Index, compared with the global average of 5.86.

However, the surveyed Indians also said that they are not entirely on track to meet their desired retirement income.

A majority of the respondents were of the opinion that they will have to financially support their families even after retirement. Nearly three-quarters (73%) of Indian workers in the survey expect to support family members, apart from spouse or partner, financially after retirement.

But almost two-thirds (63%) were optimistic that they will have enough money to live on in retirement. Moreover, 44% of the respondents are extremely or very confident that they will be able to fully retire with a comfortable lifestyle, compared to just 22% across all 15 countries surveyed. More than half (56%) of retired Indians said they were currently financially comfortable, and a similar number (52%) believed that they will always be able to live comfortably in retirement.

However, those who are still working did not think that they are on track to achieving their desired retirement income. On an average, Indian employees are on course to achieve only 71% of the income they will need. This may be a result of inconsistent savings habits, as only half (51%) of the respondents said they saved habitually.

Saving habits

Indian workers placed much stock in employer contributions to retirement plans, with nearly a third (31%) using a workplace pension plan with employer contributions to prepare for retirement. Further, 38% said a better retirement plan match from their employers would encourage them to save more.

There is high uptake of savings accounts and life insurance products for retirement savings in India, particularly when compared to holdings in other countries. While life insurance and fixed deposits are the most prevalent investment instruments for retirement, the persistent popularity of gold and real estate (43% and 42% of Indian respondents invest in these, respectively, for retirement) reflects ongoing concerns about the impact of inflation on savings and investments.

Indians use savings accounts to a much greater extent than in other countries, constraining their ability to earn income from their savings and investments. Nearly two-thirds (61%) said they used savings accounts to prepare for retirement, compared to 39% across all countries surveyed. Products with easy-to-use access to tracking and management of retirement savings would encourage 39% of working Indians to save for retirement. Indians also tend to be much more interested in different types of investment products than in other countries, suggesting strong appetite for new financial products.

While more than three-quarters (78%) believed that the National Pension System (NPS) was as safe or safer than bank fixed deposits, only 42% are using NPS to save for retirement, compared to 62% who are using fixed deposits. This despite the NPS schemes earning double-digit returns this year and being open to the public since 2009.

Indians tend to be risk averse, demonstrating a strong preference for a ‘lower return, guaranteed’ pension over a ‘higher return, more uncertain’ pension. Those who prefer a ‘lower return, guaranteed’ pension would, on average, pay 6% more for such a pension.

Recommendations

Indian investors saving for retirement need to do so more consistently to stay on track for retirement income goals and to feel more secure about not having to work later. They also have a strong appetite for different kinds of investment products, and so a wider diversity in products would encourage more savings towards retirement.

Furthermore, financial support from and of family members during retirement needs to be important considerations when planning for retirement, particularly for women.

Edited excerpts from Aegon Religare Life Insurance report, Inspiring a world of habitual savers: The Aegon Retirement Readiness Survey 2015.

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Published: 30 Jul 2015, 07:31 PM IST
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