Retirement At Risk: Indians Dreaming Big For Retirement, But Saving Too Little, Says Survey

Majority of working Indians dream of a comfortable post-retirement life, like everywhere else. However, their savings speak otherwise. According to a recent study, titled India’s Pension Landscape: A Study on Retirement Reality and Readiness, conducted by Grand Thornton Bharat, a vast majority of Indians do not seem to have knowledge about the basic math required for building a retirement corpus—in terms of the savings required now for generating a certain amount of pension later. 

According to the survey, more than 55 per cent of those surveyed indicated they are looking for a pension of over Rs 1 lakh every month, even as their savings amount towards retirement is a meagre 1-5 per cent of their income. This disparity indicates that most individuals might not have sufficient funds to sustain their lifestyle when they retire from work. The report points to a concerning absence of financial planning, despite the presence of high-income earners.

Younger Workers Plan for Early Retirement

The report revealed that younger working professionals, particularly those below the age of 25, are planning to retire early—some even before the age of 50. Almost 43 per cent of them in this age bracket are looking to retire between 45 and 55 years of age.

While early retirement may bring about more leisure and flexibility, it will also mean a longer period to support through your savings. Without good savings strategies and investment practices, these aspirations could stay a fantasy, according to the study.

Lack of Awareness Contributes to Problem

One of the biggest problems, the report cited is the lack of awareness regarding retirement plans and how pensions are computed. A huge 50 per cent respondents claimed they were not aware of the Atal Pension Yojana (APY), a government-initiated plan for low-paid workers. Only 17 per cent claimed to have full understanding of how their pensions would be computed.

This ignorance is a cause for concern, since it has a direct impact on the capability of individuals to plan their finances. If individuals don’t have an idea of how much they should save or what they receive from their retirement schemes, then they are bound to fail in their plans, the findings revealed.

EPF, NPS Well-Known Schemes, Yet Low Satisfaction

Most individuals are, however, aware of schemes, such as the Employees’ Provident Fund (EPF) and the National Pension System (NPS). About 35 per cent of the respondents indicated they use EPF, while 23 per cent use the NPS for building their retirement corpus. But most of them are not satisfied with the performance of these plans, according to the study.

Only 32 per cent of NPS subscribers expressed satisfaction with its returns. Around 39 per cent were neutral, and 25 per cent were not enrolled in NPS at all. Most respondents also expressed that EPF and Public Provident Fund (PPF) returns were inadequate to cover their retirement expenses.

Gratuity and Annuities Fall Short

The survey also indicated that gratuity payments—designed to sustain employees upon retirement—seem to be inadequate. A shocking 99 per cent of the participants claimed their gratuity pay was inadequate. Meanwhile, only 24 per cent had purchased annuity plans, which provide a systematic flow of income upon retirement.

According to the study, additional guaranteed income products would assist in bridging this gap. “Bridging this gap requires a robust and inclusive pension ecosystem that aligns with the lifecycle needs of individuals while supporting objectives like capital formation and financial stability,” said Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat.

He added: “Strengthening on-boarding processes, enhancing digital infrastructure, and expanding financial literacy will be key to increasing participation in formal pension instruments. Not only these, a forward-looking regulatory framework is also necessary to achieve the tandem.”

Security is More Valuable than High Returns

When questioned about the kind of investment they would want, 39 per cent of respondents said they wanted government-backed pension schemes. Just 16 per cent wanted high-risk, high-return investments. Younger individuals were more willing to take risks, as 31 per cent of those aged under 25 opted for high-risk plans.

However, to the majority, financial security is the number one concern. A huge 75 per cent of the respondents raised concerns over the safety of their pension funds, indicating reliability and trust were key considerations when selecting retirement products.

A Call for Improved Financial Education

The report indicates that further action needs to be taken to assist individuals in planning for retirement. Most are saving insufficiently, are not aware of their pension provision, and are in doubt about whether they will have sufficient funds in their old age.

The government and banking institutions should work together to enhance financial literacy. Individuals must learn what to save, how their pensions are to be calculated, and which products provide secure returns. 

Ramkumar S, partner, Grant Thornton Bharat, said pension is the cornerstone for financial inclusion. “The government is trying to bring in fiscal prudence and funding, and managing pension on their own will be a stretch and hence the importance of a self-reliant pension system which is managed independently is the need of the hour,” he added.