PGIM India Mutual Fund, a wholly owned business of PGIM, the global investment management business of Prudential Financial, Inc., commissioned Nielsen, the leaders in global measurement, to gauge attitudes towards retirement planning. The Retirement Survey by PGIM India MF, revealed that the notion of India as a country of savers may be outdated. With the rise of home loans, unsecured loans and credit cards, Indians are saving and investing less, and focusing more on current expenses rather than saving and planning for the future.
- The conventional model of stable employment and retirement by 60 is increasingly outdated
- People like to plan for happy outcomes and or unknown eventualities and not for unhappy outcomes or known eventualities like Retirement.
- Elements like break up of joint families, presence or absence of alternate sources of income and fear of dependence on children in old age are playing important roles in people’s attitudes to retirement.
- Indians living in a joint family system feel more financially secure and this is still perceived as an important support-system in retirement.
- Safety and security as an association to money is shifting to fulfilling dreams and having a better life.
- Urban Indians are saving and investing less, allocating nearly 59% of income to current expenses.
- Most Indians do not have a ‘retirement fund’ – either because they haven’t begun retirement planning yet, or they just have all-purpose funds and investments that may later be used for retirement, in case any of the other worst-case scenarios do not materialise.
- Onethird of people have some form of alternate income.
- 51% of people who have planned their Retirement also have some form of alternate income.
- Priorities such as children and spousal security and even fitness and lifestyle ranked higher than Retirement.
- Only 46% of private-sector employees say their employers motivate them to plan for retirement.
- 65% of Indians say retirement planning advice from employer would increase loyalty to the organization
Ajit Menon, CEO, PGIM India Mutual Fund said, “The only financial goal for which you do not get a loan for in today’s world is retirement. You can get a loan for everything else from higher education, house, car, starting a business etc. This puts the onus for being prepared squarely on each of us. We felt the need to study the decision-making processes around retirement savings and the level of awareness on this financial goal, given the number of the aged is set to increase in the coming years in India. Products like reverse mortgage haven’t seen acceptance. This important study with our partner Nielsen sets a base line on the subject and we hope will help people, planners and policy makers alike. Our first study has indicated retirement planning is not a top priority for Indians, and therefore, already a point of concern. Given the current economic challenges emerging in the wake of the global pandemic, the need for future financial security or financial freedom is even more pertinent today. The study has revealed a new and changing facet of our society and we will study this on a periodic basis to track and hopefully impact the issue positively.”
The survey revealed that retirement planning rated low on people’s priorities, with children and spousal security and even fitness and lifestyle ranking higher. The survey shows a lack of awareness of the right kind of financial planning even among those who did plan for retirement. At the same time, the survey reveals that Indians are seeking better quality advice from employers and financial advisors and are exploring products to balance aspirations and financial stability. Even though retirement is not a priority, Indians are more anxious about their future and worry about the cost of living, healthcare issues and the lack of family support in the future.
Symptomatic of a society in flux, the study also shows that elements like break up of joint families, presence or absence of alternate sources of income and fear of dependence on children in old age are playing important roles in people’s attitudes to retirement.Given these various countering elements and a clear state of flux, the study clearly indicates a stronger need for the Indian financial services industry to focus on providing retirement planning advice to help Indians make astute financial decisions and ease their anxieties.
The survey across 15 cities focuses on some key questions includingwhen do Indians plan their retirement and what are the possible reasons; what financial instruments are utilized; is lack of awareness undermining retirement planning; are Indianseager to learn more on retirement planning; and how employers play a vital role in raising awareness.
Some of the Key Findings are mentioned below:
- Urban Indians today are saving and investing less, while allocating nearly 59% of income to current expenses
- Given less savings, Indians are also increasingly anxious about their future
- 51% of respondents had not made financial plans for their retirement
- 89% of Indians who feel unprepared for retirement, do not have any alternative income
- Barely 1 in 5 Indians consider inflation while planning for retirement
- 41% of respondents said they had focused their retirement investments on life insurance, while 37% preferred fixed deposits
- 48% respondents are not aware of amount required for life after retirement. Whereas 52% are aware of the corpus required
- Of the 48% of respondents who were unsure of their required corpus, 69% ended up making no retirement plan at all. Conversely, of the 52% who say they are aware of the corpus they will need, 66% have a retirement plan
- Indians tend to account for personal events but neglect external events when planning for retirement
- On average, urban Indians aim to gather a corpus of about ₹50 lakh. Our respondents, who had an average annual income of around ₹5.72 lakh, at an average age of 44 years, believed that they would need a corpus of around ₹50 lakh for retirement, or about 8.8 times their current annual income.
- Strong need for Indian financial services to focus on retirement planning to help Indians make astute financial decisions and ease their anxieties
The Financial Priorities of Indians
39% of Indians say they have no trusted advisor to guide their retirement planning as one of the concerns related to retirement. The study uncovers that retirement is perceived as a detraction from financialfreedom, a mindset that needs to be addressed. There lies a massive opportunity ahead as more than half of urban Indians have not planned their retirement. The survey also indicates that decline of joint family system is driving Indians to want to become more financially self-sufficient. Also, given that individuals are eager for high-quality financial advice, this is a clear opportunity for the financial services industry to create and introduce new and innovative products. The study predicts, those with professional advisors, settled financial plans and multiple sources of income have possibly fared better during the pandemic
Mr. Menon said, “As the onus lies on the financial service industry, we have to continue to refine and innovate retirement solutions. We at PGIM India are committed to provide an innovative range of financial planning awareness initiatives, customized products and services to help consumers become financially secure. These initiatives draw on our deep understanding of the Indian financial landscape and we also have the advantage of drawing upon the vast global experience of our parent Prudential Financials’ experience in the area of retirement. The insights from this study will help us serve our consumers better,”
“As employers, we can do more to help our employees through sustained encouragement and inculcate in them the habit of financial planning which could help them secure their future. The other key focus area would be creating mass awareness around the necessity for retirement planning, financial freedom and security” added Mr. Menon.