Retirement Planning: India’s young adults in both tier-1 and tier-2 cities are increasingly recognising the importance of planning for their retirement, said a new survey. The results revealed a significant shift in the mindset of young adults, with a strong focus on securing their financial future.
In the month of October, BajajCapital conducted the survey, reaching out to 5500 adults across India, all falling within the age group of 35-60 years.
Key Findings:
Millennials Taking Charge: The survey discovered that an impressive 32% of the 5500 respondents aged 35-60 have already begun their retirement planning journey. This finding signifies that the millennial generation is proactively initiating their financial planning for retirement.
Pandemic-Induced Awareness: The COVID-19 pandemic has played a pivotal role in raising awareness levels concerning retirement planning. Post-pandemic in 2022, 38% of respondents have started planning for their retirement.
Preferred Financial Instruments: Mutual funds emerged as the most preferred financial instrument, chosen by 75% of the respondents, followed by insurance (term and health) at 44% and fixed deposits at 43%.
Sense of Urgency: The survey underscores the growing sense of urgency among young adults to achieve financial independence during their retirement, given the increasing life expectancy and rising inflation rates.
Tier-2 City Optimism: Interestingly, tier-2 cities are witnessing a gradual but promising increase in the realisation of the importance of retirement planning. 20% of respondents from tier-2 cities initiated their retirement planning in their late 40s, comprising 16% male and 4% female.
However, 80% of respondents from these cities have not yet started planning for their retirement, relying solely on their savings and children.
Rajiv Bajaj, chairman and MD, BajajCapital, said, “The outbreak of the pandemic has been a wakeup call for all of us in numerous ways, and this includes retirement planning too. Unforeseen circumstances can strike at any point in time. Therefore, we need to plan in advance for a peaceful retirement. I am glad that with the help of this survey, it has been pointed out that the perception of youngsters living in tier-1 and tier-2 cities is changing. They are becoming conscious about investing to build a corpus for retirement.”
Jai Bajaj, CEO – retirement business, BajajCapita, added, “Retirement is a life goal that needs planning beforehand. Not many people can plan efficiently, and therefore we are always committed to help them by offering the best of plans for a worry-free retirement. This survey is a testimony to the fact that our efforts in this area have been fruitful. These days, life expectancy has reached 100 years, and a retiree must ensure that his money outlasts him.”
The Growing Importance of Retirement Planning:
The survey revealed that 25% of respondents believe that retirement planning is a crucial decision, and the sooner one begins, the better the chances of building a risk-free and substantial corpus.
However, 75% of respondents remain skeptical about initiating their retirement planning. Of note, 70% of survey respondents hailed from tier-1 cities, with the remaining 30% from tier-2 cities.
Indian Retirement Planning Market Growth:
The Indian retirement planning market is poised for substantial growth, with an expected Compound Annual Growth Rate (CAGR) of 20% over the next five years.
Several factors are contributing to this growth:
- Increasing Awareness: Growing awareness about the importance of retirement planning.
- Rising Incomes: Increased disposable incomes among the Indian population.
- Youthful Workforce: A burgeoning population of millennials and Generation Z workers.
- Government Initiatives: Steps taken by the Indian government, such as the launch of the National Pension System (NPS) and the Atal Pension Yojana (APY).
Preferred Financial Instruments:
The survey found that mutual funds are the most popular financial instrument for retirement planning in India, followed by insurance and fixed deposits. Young adults are increasingly turning to mutual funds to secure their retirement.
Regional Disparities:
The survey results also highlighted regional disparities. People in tier-1 cities are more likely to initiate retirement planning early and invest in a wider range of financial instruments than those in tier-2 cities.
However, despite the positive trends, a significant portion of the Indian population remains without a retirement plan.
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