Half of the salaried in private sector lack retirement plans: Survey

Roughly half of India’s salaried wokforce in the private sector contribute little for their retirement benefits, while the other half earmark 1-10% of their salaries for these, according to a survey. This indicates a cautious approach to savings, because of financial constraints or competing priorities, the survey rt by Grant Thornton Bharat showed.

While higher earners contribute more to retirement products, the overall contribution is still relatively low for most individuals, suggesting that many people may not be saving enough for retirement.

The survey —India’s pension landscape: A study on retirement reality and readiness — was conducted mostly in the age group between 25 to 54 years and employed in the private sector.

There is a significant gap between the desired pension and the perceived adequacy of current retirement savings. More than half (55%) of respondents expect a monthly pension of over Rs 1 lakh. However, only 11% believe their current investments are sufficient to meet these expectations. “This stark disparity highlights a significant preparedness gap that needs to be addressed through better financial planning and awareness,” the report says.

About 83% of participants rely predominantly on three retirement products: Employees’ Provident Fund (EPF), gratuity, and National Pension System (NPS). In fact, the reliance on traditional schemes suggests limited diversification in retirement portfolios.

The report highlights that while India has made strides in introducing pension schemes like the NPS, EPF, and Atal Pension Yojana, the existing systems are not fully effective in ensuring that individuals are financially secure post-retirement.

“The low contribution rates, lack of satisfaction with returns, and insufficient benefits from gratuity and other savings indicate a mismatch between what individuals expect and what is currently available,” it says.

While EPF and NPS are popular retirement products, there is notable dissatisfaction, especially with NPS returns. The lack of satisfaction with existing pension schemes indicates the need for better-designed, more attractive retirement solutions.

“The NPS scheme may need reforms to address concerns about returns and customer satisfaction,” the report recommends. The low rate of annuity investments emphasises the uncertainty surrounding guaranteed post-retirement income.