The research team developed the AEGON Retirement Readiness Index (ARRI) to better assess how well employees view their level of retirement preparedness.
AEGON Religare Life Insurance (ARLI), released the India report on the AEGON Retirement Readiness Survey 2014 - Changing Face of Retirement. In the 15-country online survey that was carried out jointly by ARLI’s parent company - AEGON and Cicero Consulting, India participated for the very first time and ranked first on the AEGON Retirement Readiness Index (ARRI), ahead of BRIC counterparts - Brazil and China.
The research team developed the AEGON Retirement Readiness Index (ARRI) to better assess how well employees view their level of retirement preparedness. The India Index score of 7 is the highest of all 15 countries surveyed. This means that an ‘average’ or ‘typical’ Indian with online access has only a ‘medium’ level of retirement preparedness. 49% of the Indian employees surveyed, claim to be habitually saving, compared with 38% of the global sample.
On the release of the India report, KS Gopalakrishnan, Managing Director & Chief Executive Officer of AEGON Religare Life Insurance (ARLI) said, “India is an emerging market for pensions and annuities. With the outcome of the Retirement Readiness Survey where India has ranked first on the retirement readiness index, we are confident that there exists a huge potential for specific pension and annuity plans. With AEGON’s global expertise in this segment, we are hoping to bring in products to satisfy the retirement appetite of the Indian consumer.”
The India report reflects the dynamism, common to emerging markets, and is also linked to the strong savings culture engrained in the Indian society. The economy is young and vibrant; and many Indians are optimistic of the future prosperity. This survey finds that those who have access to a pension are largely confident about their retirement. Yet this group represents only a minority of a population that faces much more extensive challenges to retirement readiness. In the period of prosperity that drives young Indians optimism for the future, the challenge for retirement readiness will be to distribute these gains among all of society.
Positive Aspirations and Expectations
Respondents in India are amongst of most positive of all the countries surveyed, both with regard to expectations for the economy and their own financial situation in the next 12 months:
37% (double the global average of 19%) of workers are confident that they will be able to fully retire with a lifestyle they consider comfortable and 43% of fully retired Indians are confident that they will always be able to live in retirement comfortably.
Planning
61% claim to have a plan for retirement, but not one which is written down.
53% claim to have a back-up plan in case they are unable to continue working before planned retirement age is reached. For 74% of those with such a plan, savings will be used.
Indians (both workers and those already fully retired) are using a range of instruments to invest in for retirement:
With regards to the type of pension plan, twice as many Indians would choose a ‘lower return, guaranteed’ pension over one that offered higher returns but more uncertainty (62% vs. 31%).
Making Saving Easy
A Flexible Transition
Key Recommendations
Widening pension coverage through automatic enrollment: Given the experience in other countries, automatically enrolling employees into workplace pension arrangements could play a significant role in achieving the need for wider private pension coverage.
Developing simple savings and investments which help people manage long-term finances: Indians are increasingly able to save for their long-term finances and undertake retirement planning. Policymakers need to facilitate this process through encouraging the further development of third pillar (personal) pension products and other long-term savings products which can help Indians manage long-term investment risks and meet future retirement income needs through offering guaranteed pay-outs. The need to create simple savings and investment products should be a key consideration in this process as well as the need to ensure that these products are appropriately incentivised through the tax system.
Developing a broader understanding of financial planning needs through a national financial education program: Indians require much greater knowledge about retirement planning to help them keep up-to-date with product and investment decisions in a fast changing market place in the coming years. Building general levels of financial awareness, awareness about retirement planning choices, the requirement to consider annuities and other income generating options in retirement should be a major priority for policymakers.
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