Beyond Financial Literacy: Why Age-Associated Financial Vulnerability Needs Urgent Attention, Says PFRDA Bulletin

Does age have any association with financial vulnerability? The November 2025 bulletin of the Pension Fund Regulatory and Development Authority (PFRDA) has highlighted this aspect of Age-Associated Financial Vulnerability (AAFV) and has linked old age financial vulnerability with poor financial decisions, exploitation, fraud, and resource depletion, even if the person showed financial competence in earlier life.

 According to the article, Age-Associated Financial Vulnerability (AAFV) in the bulletin, the issue of AAFV is much more comprehensive than the generic “financial literacy for seniors” dictum and requires an integrated approach. The analysis highlights that the patterns of financial behaviour in people’s young age affect the availability of resources in old age due to their previous decisions.

AAFV Is Different From Lifelong Poverty

According to the article, the lack of money in old age is conceptually different from lifelong poverty. This is because AAFV is about financial vulnerability only in later life, among those who have previously managed their finances well, which makes it different from lifelong poverty.

 The analysis notes that people typically borrow in their younger years, save during their prime earning years, and start decumulation after retirement to manage their expenses. But the challenge is the uncertainty about lifespan, and due to it, the speed and shape of decumulation cannot accurately be worked out.

Cognitive, Emotional, Institutional And Market Frictions

The article says that “AAFV arises when cognitive, emotional, institutional, and market frictions disrupt ‘optimal’ decumulation, leading to over‑spending, under‑insurance, predatory borrowing, or susceptibility to scams.”

It also points out the changes in cognition due to ageing. Citing the gerontological and neurocognitive research, it emphasises that factors, such as reduced working memory, difficulty with calculations, and slower perceptual speed can significantly affect the capacity to compare products, detect unreasonable charges, or understand compound interest and longevity risk. Similarly, greater trust in others, desire to avoid conflict, or loneliness may increase chances of scams and persuasive sales tactics. 

AAFV Diagnosis

According to the article, these age-related vulnerabilities can be evident even before dementia is diagnosed. “Neuroimaging work suggests that early changes in brain regions implicated in valuation and social judgement may partially explain why some older adults become vulnerable to financial exploitation years before an Alzheimer’s diagnosis,” it says.

Dependency On Family Transfers Or Social Earnings And Digital Literacy

In India, only about 14-15 per cent of households reported a formal retirement savings as recently as 2019. The remaining households depend on family transfers, casual earnings, or social pension in their golden years. This makes the elderly helpless in case of illness, widowhood, crop failure, job loss of adult children, among others

Besides, the evolving digital environment, particularly digital payments and other such transactions, presents another challenge to the elderly. Tech-savvy elderly can use digital platforms, but other seniors are at risk of exclusion and online fraud and predatory lending. According to the article, poor decisions, such as taking high-cost informal loans or investing retirement proceeds in dubious schemes can have catastrophic welfare consequences on the seniors as well as their families who bear their expenses.

Addressing Age-Associated Financial Vulnerability Is Critical

The article emphasises making AAFV a distinct policy domain. It also stresses expanding the adequacy and coverage of the pensions, such as the National Pension System (NPS) and Atal Pension Yojana (APY). It suggests regulatory authorities to simplify products for seniors, introduce options that protect against the downside, and oversee sales practices and advice for retirees. As the late-life financial loss can have a cascading effect on public health, addressing age-associated financial vulnerability is critical, it further says.