RETIREMENT PLANNING IN INDIA

The concept of retirement planning is not new to us Indians, saving is in ourblood, we like to save and in that sense we are a very forward looking society.But our motivation for saving is more focused on saving for children ratherthan saving for self for old age. For retirement planning, we can simply breakthe population into three categories. Those who are concerned about retirement,those who can do retirement planning but not bothered as yet and those who arenot even thinking about it.

The first two categories either do not have correctinformation or avenue to save for retirement so they simply end up buying endowment life insurance policies as the source of retirement planning. Thethird category who can do retirement planning but not bothered are a littleaway from reality and this is the current generation which lives for today and don’t even want to think of old age. In short we have many people who haveeither not started or stopped saving for their retirement because the productselection was incorrect. Lack of information on retirement planning is yetanother issue that we Indians face. Many of us have some sort of informal retirement plan like a second house, real estate, few FD’s, stocks, MutualFunds etc. but no formal planning which takes into account inflation, taxes,retirement age, retired life estimate etc.

Wehave close to 3cr population which is working in government sectors and anotherclose to 25-30 cr working or earning population across various income ranges. Buthow many have retirement plans? Thereare no credible research numbers on this, we know those government employeeswho joined before 2004 got government pension plan, the rest are oncontribution pension plan. Outside government job, we know how many should have retirement plan. Based on the demography,around 50% of population is in the age range of 25 to 45 in that sense we are ayoung nation. These 60cr people will retire in next 20 years. Out of these 60cr we believe those who have retirement plan are less than 10cr. They also do not have adequate or properplan, and if they do majority of them would not stick to the plan tillretirement age.

Sothose who have these informal retirement plans are basically investing into oneor two of the following Provident Fund, Public Provident Fund, National Pensionscheme, house for rental income, investment in insurance schemes, FD’s, mutualfund investments and some simply believe investing in their children so whenthey grow up they will look after them financially. Some are content that theyhave bought some retirement scheme and believe that it will pay monthly incomeafter retirement.

Ifanything our friends and relatives are our advisors when it comes to retirement planning, whereas they have good intention and mean well for us they are notprofessional advisors and may not have adequate product knowledge, tax rulesawareness, financial awareness and professional qualification.

Inshort, the retirement planning in India is haphazard or informal and shortlived. The concept of advisor for retirement planning or investment consultantis new and often they get compared to insurance agent. We therefore believethat systematic retirement planning & sticking to plan is practicallynon-existent in our country.