While India will enjoy a demographic dividend in the medium term and bring down the dependency ratio over the next 30 years, in the long term the country will face the same demographic pressures as its peers. And as life expectancy increases, the retirement gap?between the official retirement age and the average life expectancy?will get larger. This will become a major concern for the current young generation and have to do their retirement financial planning in a proper manner.
A survey done by HSBC on the future of retirement shows that 51% respondents in India are worried about being able to cope financially in old age. About 14% respondents say their personal pensions will provide their largest source of retirement income while 13% will rely on other forms of savings and investments.
The survey, which was done globally, shows that one in five people do not know what their main source of income will be in retirement and 41% felt that they were under-prepared for retirement to some extent. About 64% admitted that they are concerned that they would not be able to cope financially in retirement. Globally, in the developed countries and China, people still expect that the largest proportion of income during retirement will come from state pension.
The study underlines that younger men and women are more savvy in their retirement planning and they enjoy several benefits over those who do not have a proper plan in place. Individuals who undertake financial planing are not only likely to be better off in retirement, but also are more likely than non-planners to associate retirement with positive ideas such as freedom and less likely to associate it with negative ones such as financial hardship.
The key challenge is getting households to start planning and raise the basic levels of financial literacy. The level of literacy is very low in India and a majority do not even know how to find a good advisor. However, the internet is emerging as an important source of financial information as around 45% respondents say they use various financial Websites to get information and make their financial decisions.