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India’s economic transformation and shifting demographics highlight the urgent need for robust pension systems. As one of the youngest nations globally, India must proactively focus on retirement planning to ensure long-term financial security for its workforce. While economic growth has expanded employment opportunities, a structured pension scheme remains critical to safeguard individuals post-retirement.
Our report explores the current state of pensions through a survey conducted in August–September 2024. The survey examines preparedness, expectations, and challenges in retirement planning. It highlights the current state of retirement preparedness and sheds light on the challenges and concerns individuals face as they plan for their future. These insights offer guidance for policymakers, financial institutions, and employers to enhance the future of pensions and investments in India.
A pension is a financial arrangement that guarantees individuals a steady income once they retire from active work. It aims to provide financial stability and security during old age and is usually funded by contributions made by employers, employees, or both, accumulated throughout the person’s career.
This is a mandatory savings scheme for employees in the organised sector. The employee contributes a percentage of his salary, and the employer matches it. This scheme is widely used by individuals working in the private sector.
The NPS is a voluntary and contributory pension system introduced by the government of India for individuals in the unorganised sector and those not covered under EPF. The NPS allows individuals to contribute to their pension fund during their working years and provides a corpus for their retirement.
This government-backed pension scheme targets the unorganised sector, especially low-income workers. The APY offers guaranteed returns based on a monthly contribution and aims to provide financial security in old age.
Gratuity is a lump sum payment made by employers to employees who have completed five years of service, meant to provide a cushion post-retirement.
Introduced on 24 August 2024, replacing NPS, UPS ensures government employees receive 50% of their last salary as a lifelong pension, with periodic dearness relief hikes and a minimum pension of INR 10,000.
This scheme is aimed at securing children’s financial future through pension accounts. Minors can subscribe to this scheme with flexible contributions from INR 1,000 annually. It also features an online registration platform and is also available for NRIs.
Understanding the demographics of the respondents provides valuable context for interpreting the survey findings.
80% of survey participants are male, reflecting a gender disparity in engagement with pension schemes. Increasing awareness among women is essential for inclusive financial preparedness.
79% of respondents are aged 25 to 54, indicating that the majority are in the most active phase of their working and retirement planning lifecycle.
With 88% of respondents from the private sector, the responsibility for effective pensions and investments falls significantly on private employers and their supported plans.
The income levels of the respondents and contribution patterns provide critical insights into their financial readiness and approach to retirement planning.
44% of respondents earn below INR 20 lakh annually, and 30% earn over INR 40 lakh. Yet, pension contributions remain modest across all income levels, pointing to a gap in savings culture.
74% of individuals contribute between 1% and 15% of their income towards retirement funds. Even among high-income earners, contributions often fall short of the levels needed to support the expected pension after retirement. Also, 83% of participants mainly use EPF, gratuity, and NPS, showing limited retirement portfolio diversification.
Retirement age and pension expectations are crucial aspects of retirement planning.
56% of respondents expect to retire between 55 and 65 years. Interestingly, younger respondents show a growing desire for early retirement, with 43% in the under-25 group aiming for retirement before 55. This group prioritises work-life balance and leisure over extended career spans.
Over 55% of respondents expect monthly pensions exceeding INR 1 lakh, but only 11% are confident in their current savings. This mismatch signals a pressing need for realistic retirement planning and financial education.
A large gap exists between expected pensions and actual savings, revealing low confidence in future financial security.
Awareness of pension schemes and investment preferences is critical for effective retirement planning.
Approximately 50% are unaware of the Atal Pension Yojana and its benefits, and 30% do not understand how their pension scheme amounts are calculated, highlighting major knowledge gaps.
39% prefer government-backed schemes, followed by 27% who trust private institutions. Younger respondents are more inclined toward high-risk, high-return options, indicating evolving attitudes toward pensions and investments.
75% of respondents express concerns about the security of their pension funds. Stability and transparency are key demands.
39% are neutrally satisfied with the National Pension Scheme, and only 32% report satisfaction, underscoring the need for reforms in NPS offerings. It’s also noteworthy to know that 26% of respondents are not enrolled in the NPS scheme.
99% feel their gratuity is insufficient, and only 29% were informed about their gratuity benefits in advance.
76% have not invested in annuity products, missing a crucial element of a steady pension after retirement.
Reputation and high returns top the list of decision factors at 31%, but tax benefits and flexibility are less emphasised.
Satisfaction with the Public Provident Fund and Employee Provident Fund remains moderate, with 60% and 37% of respondents neutral, respectively. These findings highlight underutilised opportunities within existing pension schemes.
A study on retirement reality and readiness