Amit Chandra (not his real name) returned home from a dinner one Saturday about six months back when he felt a sharp twinge in his stomach. A visit to the family doctor the next day did not result in any relief to the persisting discomfort; it led, instead to a referral to a specialist at one of Mumbai’s best known hospitals. Just 48 hours after he was being toasted by friends at his retirement party, Amit was arranging for funds for an emergency operation — to stop the bleeding from an ulcer.
Sufficient coverage under health insurance policy ensured that Amit could afford the best treatment. But the worry is about the subsequent incidental expenses — among other things, the expenses of the special diet now needed the cost of repeated visits to doctors, and the higher electricity bills from the demands of the increased use of the juicer, mixer, air-conditioning and geyser. His daughter and son-in-law are anxiously re-organising Amit’s(small) investment portfolio, hoping to ensure that Amit and his wife have enough to live on and pay for the ongoing medical expenses. It’s becoming clear to them that they will have to help support the older couple. The worry lines have begun to appear also on their faces, extending from the faces of Amit and his wife, who, incidentally, suffers from asthma.
Retirement planning is rare in India, where financial dependence on children is high. Pension plans set up by employers are considered sufficient — though, all too often, these packages take a miserly view of inflation.
Amit was with a university for most of the 32 years of his working career; his monthly pension is around Rs30, 000, a meagre sum for living in Mumbai, and an impossible sum for their health-related needs, care that no health insurance plan will cover indefinitely.
Perhaps late for Amit, his experience has been a lesson for his daughter and son-in-law — benefit plans ordained as mass products by employers are just not enough. If retirement needs are specific to the individual, then retirement plans must be too.
There are various financial savings options to plan for ones retirement. The Pension Fund Development and Regulatory Authority, set up in 2003, regulates three broad types of pension schemes — the government pension schemes (such as the one that covers Amit Chandra), the National Old Age Pension Scheme for people living below the poverty line, and the private pension schemes / funds.
Pension plans from life insurers could be another lucrative option, which not only lets you plan for retirement in a structured systematic and disciplined manner but also provides protection against uncertainties. So much so that there are plans today which even ensure a guaranteed financial support for your spouse’s retirement even in your absence. These plans offer a wide range of options in terms of various benefits and payment schemes. Subscribers can opt for a payment plan based on their financial capacity, their projected needs after retirement and on the basis of the age at which they plan to retire.
A pension plan can be purchased on a one-time lump-sum payment (a better choice for those close to the age of retirement) or deferred payment of regular annual premiums over a period of time, which younger people can opt for more comfortably. The benefit of income after retirement can be disbursed immediately upon the subscriber’s retirement or, alternately, the subscriber could choose to defer the payment wholly or in part till such a time as he or she requires it; the monthly annuity would be calculated accordingly. Plans also allow for life-time annuity payments or payment for a guaranteed period of time. Some plans also offer the return of annuity amount to nominees, leaving behind a legacy for them.
Today, Amit and his wife are considering selling their two-bedroom apartment in Mumbai and moving to a smaller, cheaper town — they are not sure where! They still need a place where advanced medical care is available. This unhappy choice also means that will not spend their golden years comfortably in the security of a familiar neighbourhood, with an established support system run by long-known people, among old friends and regular acquaintances.
For Amit’s daughter, such an unhappy choice is no choice — she and her husband have begun to plan their future on realistic projections of pension needs and various eventualities, working inflation into their calculations. She’s working on her Mona Lisa smile!
Anisha Motwani, Director & Chief Marketing Officer, Max Life Insurance
NOTE: The views expressed here are those of the author alone and Express Group takes no responsibility for same.