Retirement unease: Is it getting better or worse?
The results of a recent survey point to significant gaps in the post-career plans of private sector employees in India. While many financial avenues can offer relief from retirement worry, RBI has a major role to play.
In India, employees who are not on government payrolls have long been familiar with retirement unease. Recently, though, a new benchmark popped into view. The Centre’s Unified Pension Scheme (UPS) option, which was thrown open to central workers on 1 April, offers half of one’s average basic salary drawn in the last year of work as pension (if one puts in 25 years of service).
The very mention of half one’s last pay prompts a basic question: Are those with no UPS access putting enough away for their silver years? Maybe not. A survey of pension planning by Grant Thornton Bharat (GTB), a professional services firm, has flagged a big gap between the money people expect they’ll have to live on as they age and the reality of their financial situation.
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This is among a significant slice of our workforce. Folks employed by the private sector made up nearly nine-tenths of the survey’s sample, with 30% earning above ₹40 lakh annually and the vast bulk taking home more than twice of India’s GDP per head. As the GTB study puts it, over 55% of respondents expect monthly pensions exceeding ₹1 lakh, “but only 11% are confident in their current savings."
The survey was done over August and September 2024. The UPS, which was approved by New Delhi in the midst of that span, may or may not have inflected responses. But the survey also points to low satisfaction with the National Pension System (NPS) that’s open to all Indian 18-70-year-olds. Have retiral back-ups like NPS begun to look pale in contrast with the UPS deal? Plausibly.
If this isn’t a source of unease, it should be—since so many of us seem to be falling short on stuffing our nest eggs. Either way, the point is not to interpret the worldly context of a survey finding, but to explore viable avenues of relief. According to the GTB report, future needs and means being out of whack “signals a pressing need for realistic retirement planning and financial education."
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Indeed. Even in this age of agentic AI bots headed our way to help out, with ‘Fire’ calculators at the disposal of youth in pursuit of ‘financial independence’ to ‘retire early,’ lifelong plans remain sketchy. Clearly, many of us need to get our act together. This is also the market pitch made by various investment vehicles. The ‘Mutual fund sahi hai’ (it’s right) campaign, for example, has played an undeniable role in drawing money into long-held mutual funds.
That equity has been a big draw is no surprise, given the appeal of its returns. Some of our retail rush for shares could be explained by how capitalism has caught on. As Thomas Piketty said, if the rate of return on capital exceeds the rate of economic growth, wealth will enlarge faster than income. To amass the money needed for a cushy life, every salaried person has the risky but rewarding option of buying into the country’s capital pie.
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Of course, advice to invest wisely usually assumes that if one needs a helping hand with old-age security, it’s best to look for one at the end of one’s arm. In a market economy with a weak welfare net for all but the poor, the onus is on us to take charge of our financial lives.
However, there is a favour that the Reserve Bank of India (RBI) can do us that must not escape notice. No multi-decade plan can be firmed up without clarity on the rupee’s path of purchasing power into one’s old age. But if RBI shows both the will and ability to keep inflation capped at 4% over the long haul, it’ll enable truly realistic plans. In assuring us retirement relief, RBI has a major role to play.
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