A significant portion of the Indian population lacks diversification in their retirement planning. A recent Grant Thornton India survey revealed that 83% rely solely on traditional schemes like EPF, gratuity, and NPS.
Business News: Retirement planning in India remains a challenge for many. The failure to take necessary steps for financial security is increasing future uncertainty and economic pressure. A recent Grant Thornton India survey highlighted a significant shortfall in retirement planning across the country.
The survey indicated that 83% of Indians still depend solely on traditional investment schemes such as EPF, gratuity, and NPS. Furthermore, over half expect a pension that will not meet their actual financial needs.
Over-Reliance on Traditional Schemes Leaves Retirement Preparations Incomplete
The Grant Thornton survey found that most Indian employees and the general public rely on a limited range of retirement options. While schemes like EPF, gratuity, and NPS are crucial for financial security, complete dependence on them can be risky. 83% of participants cited these schemes as their primary investment option.
Experts suggest that a lack of investment diversification jeopardizes long-term financial stability. Reliance on only one or two sources can negatively impact financial security due to market fluctuations or policy changes. Therefore, adopting new and diverse investment plans for retirement is essential.
Unrealistic Pension Expectations and Lack of Financial Awareness
The survey also revealed that 55% believe they will receive a pension exceeding ₹1 lakh per month after retirement. However, only 11% are investing accordingly. This data clearly shows a significant gap between aspirations and financial reality for most people.
Financial experts believe the primary reason for this imbalance is a lack of proper financial planning and awareness. Expecting a pension without proper planning is unrealistic. People are advised to diversify their retirement funds and regularly review their investments.
Low Contribution to Investments and Budgetary Challenges
The survey also found that approximately 74% of people invest only 1% to 15% of their monthly income in their retirement fund. This indicates that most people are not prioritizing their savings. Economic constraints, daily expenses, and financial priorities are the main reasons for this shortfall.
Experts warn that low contributions to retirement funds can lead to serious financial difficulties in the future, especially with increasing life expectancy and rising medical costs. Therefore, it is crucial to start investing as early as possible and increase savings annually.
Changing Attitudes Towards Investment Among Young People
The survey also found a shift in investment attitudes among young people. Approximately 31% of those under 25 are willing to embrace higher-risk investment options for potentially higher returns. This is a positive sign, indicating that young people are now looking towards long-term, secure, and profitable investments.
Furthermore, the new thinking among young people reflects a greater emphasis on work-life balance and early retirement. According to the survey, 43% of young people want to retire between the ages of 45 and 55, while 56% overall plan to retire between 55 and 65.
Lack of Awareness Regarding Pension Calculation
The survey also highlighted a lack of awareness regarding pension calculation and formulas. 52% of participants had partial knowledge of pension calculations, while 30% had no knowledge at all. This underscores the need to improve not only investment strategies but also understanding of pension schemes.
What Do Experts Say?
Financial advisors emphasize the importance of diversification in retirement planning. Relying solely on EPF, gratuity, and NPS is not a sound strategy. Mutual funds, the stock market, Public Provident Fund (PPF), real estate, and other alternative investment avenues should also be considered.
Regular financial education and awareness programs should guide the public towards sound investment decisions, enabling them to fully understand and benefit from their financial goals.
