In recent years, many more Indians have started investing in mutual funds and campaigns like “sahi hain ‘mutual funds clicked. Lagging, stock purchases have also increased, thanks to the emergence of new technology-driven equity investment platforms. But, do Indians plan enough for their retirement? Not enough.
More than half of Indians in towns have no retirement plan; it is considered important, but a distant prospect, according to a survey by PGIM India Mutual Fund. The fund company is a wholly-owned business of PGIM, the global investment management firm of US-based Prudential Financial Inc. Survey of 15 cities found urban Indians are saving and investing less, while allocating nearly 59 percent of their income goes to current expenses.
In a country like India, where the private sector does not provide pensions and there is also no government social security program, retirement planning will become of the utmost importance. Yet 51 percent of survey respondents had made no financial plans for their retirement.
Child and spouse safety and even fitness and lifestyle are more important than planning for retirement, the survey found.
Up to 48% of those surveyed said they did not know the amount required for life after retirement. Worryingly, among those respondents unsure of their required retirement corpus, 69 percent ended up making no plans, according to the survey.
“The only financial goal you don’t get a loan for in today’s world is retirement. You can get a loan for all the rest of higher education, home, car, starting a business, etc. This requires each of us to prepare … Given the current economic challenges that are emerging as a result of the global pandemic, the need for future financial security or financial freedom is even more relevant today, ”emphasizes Ajit Menon, CEO of PGIM India Mutual Fund.
Those planning their retirement, the average respondent collects a corpus of about Rs 50 lakh, or about 8.8 times the average annual income. Even those who plan often make ill-advised plans without assessing their own needs and fail to make adequate arrangements for contingencies such as inflation.
Additionally, 41 percent of those polled said they focused their retirement investments on life insurance, while 37 percent preferred term deposits.
Among other popular retirement investments, Medicare was favored by 15 percent of respondents, 15 percent had gold, recurring deposits (14 percent), post office (14 percent ), National Savings Certificate (NSC) (9 percent) and property (9 percent).
Growing prosperity and improved healthcare have dramatically increased the average lifespan in recent decades. But the cost of living is also increasing and traditional mixed family structures are also falling apart. Against this background, perhaps, there is now a need to shift the conversation towards retirement planning. It is important to note that the stigma surrounding retirement should be removed by changing the narrative from negative thoughts becoming obsolete to positive thinking about a happy and secure retirement life, the survey suggests.
There is also a clear opportunity for the financial services industry to create and introduce new and innovative products, says Menon.
The COVID-19 pandemic has had a huge impact on lives; people lost their jobs, wages were cut and suddenly the spotlight was on the huge costs of health care. According to Menon, the pandemic may bring deeper changes in people’s habits, but whether they are long-lasting is something that will need to be watched.
“Early studies indicate reduced spending and a preference for cash and savings, but we’ll have to see if these behaviors continue over a period of time after the pandemic emergency. We will also have to see whether consumers will be more oriented towards channeling funds to secure their future. In addition to government, the financial advisor community will need to play an important role in raising awareness and guiding behavior in this context, ”he said.