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As we commemorate the 75th anniversary of our independence, we are at an inflection point of ensuring income security for the ageing population and of delivering financial freedom to the working population —enabling them to fulfil their needs even after retirement.

Thanks to the ever-improving health facilities and sanitation in the country, the life expectancy of Indians has gone up from 35 years in 1950 to 70 years at present. Between 2020 and 2050, India is likely to add 183 million people to the working age group of 15-64 years. While this addition of a vibrant young population—often referred to as ‘demographic dividend’—to our workforce is a reason to celebrate, our elderly population is expected to reach over 227 million by 2050, up from 60 million at present. It is projected that nearly 20% of India’s population would be 60 years and above by 2050.

Non-synchronous with the changing demographics, the average age of retirement from work has remained unchanged. For a sizeable population, this implies an increase in the number of post-retirement years that one has to sustain himself/herself through alternate income sources.

Having a financial cushion in the form of pension, investments and retirement savings will offer them the freedom to lead a life of dignity and self-reliance.

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Physical assets dominate

Another peculiarity of the Indian household finance is the preponderance of physical assets in the form of gold or real estate and low desirability of financial assets, let alone exclusive savings for retirements. According to a Reserve Bank of India (RBI) study, the average household in India holds 77% of its total assets in real estate, 11% in gold, 7% in other durable goods and a meagre 5% in the form of financial assets. As a result, in times of crisis, most families have no contingency fund to fall back upon. When faced with requirements for an emergency expense, majority of individuals have no choice but to dig into their pension funds or savings earmarked for retirement.

As per the RBI study, only 23% of respondents in India were either actively saving or planning to save for retirement, 33% aren’t planning for retirement and a vast majority of 44% of the respondents aren’t expecting retirement at all. This shows that ‘Save less, plan less for retirement’ seems to be the mantra for a majority of our citizens. This attitude could be detrimental not only for Indian households but also for the fiscal health of the nation.

Elderly seeking employment

For individuals and families, absence of a regular pension and retirement corpus, could lead them into a long-term debt trap with high interest rates and unsecured loans. Absence of a retirement corpus or a regular pension is driving many elderly people in our country to seek employment even after the age of 60. A UNFPA (United Nations Population Fund) report sheds light on this grim reality. It states that a majority of the elderly, as high as 71% in India, work due to economic necessity and other compulsions, and not by choice.

The path to attainment of freedom in 1947 was not an overnight affair. It was a long-drawn battle forged with toil and sacrifices of innumerable brave, determined, devoted and dedicated individuals. The path to financial freedom will also not be an instantaneous process. It will be a continuum of activities starting with financial awareness, planning early, making prudent financial decisions, creating an exclusive retirement corpus, saving & investing regularly and most importantly having patience and forbearance during the entire course.

On this Independence Day, let us all join hands to help our fellow citizens achieve financial freedom for a better and healthier life. ज ि

Supratim Bandyopadhyay is chairperson, Pension Fund Regulatory and Development Authority.

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