May 3, 2019
The seventh edition of the Aegon Retirement Readiness Survey 2018 said that India’s Aegon Retirement Readiness Index (ARRI) score was a leading 7.3
Aegon’s survey was done in collaboration with US-based Transamerica Center for Retirement Studies and Brazil’s Instituto de Longevidade Mongeral Aegon
The survey covered 15 countries - the Netherlands, Germany, the UK, France, Spain, Poland, Hungary, the US, Canada, China, Japan, Brazil, Turkey, Australia
India’s US$2.6 trillion economy is expected to reach US$7.5 trillion to become the world’s third biggest by 2050, crossing Germany, France and the UK
An April 2019 report by Aegon Life Insurance, a joint venture of The Times Group, India’s leading media conglomerate, and the Netherlands-based financial services provider, Aegon NV, has found India to be the most retirement-ready nation in the world. The Aegon Retirement Readiness Survey 2018 said that India’s Aegon Retirement Readiness Index (ARRI) score was 7.3. The report put India at the top of the 15 surveyed countries that included the Netherlands, Germany, the UK, France, Spain, Poland, Hungary, the US, Canada, China, Japan, Brazil, Turkey, Australia. India’s BRICS bloc partners – China and Brazil – came in second and third, respectively. ARRI measures how prepared workers around the world feel about their retirement. The quintessential Indian practice of saving money has been bolstered by the diversification of employment and entrepreneurship in India with new skill development and investment opportunities.
Other leading factors included low interest rate environment, technological disruptions, globalization and climate change. Meanwhile, diverse skill sets and availability of related jobs as well as improved awareness made 47 per cent of Indians think that future generations will be better off in retirement than current retirees, exceeding the global average of 18 percent. Steady economic advancements in India that have helped expand the middle class, further aided by the establishment of pension systems are reportedly making the future outlook stronger. Aegon said that around 46 percent of Indians’ retirement income was expected to come from their own savings and investments, as against 30 per cent globally, with the rest coming from employers and Government.
India is expected to have the world’s youngest population by 2020, with an average age of 29 years. And by 2030, the nation’s workforce will have an average age of 32 years, as compared with workforce age of 43 years in China and 39 years in the US. The young workforce will drive up labour utilisation, especially with the help of new innovations that are targeting increased manufacturing and future of services. This workforce will build on a generation in which around 55 per cent of workers are saving habitually for retirement, compared with 39 per cent globally. Only 1 per cent of Indians have not saved for retirement and never intend to. The rising awareness about the options for financial savings and its usefulness has also helped the Indian economy. Meanwhile, improved cost of living in India has also encouraged saving practices, as opposed to most other large economies. This has also boosted consumption in the nation.
Of the countries covered by the survey, Indians were the most positive about their national economy in the next year, with 62 per cent expecting it to get better, compared with only 32 per cent globally. This confidence has been bolstered by measures taken by Government of India to liberalise the financial and investment space, including the rollout of the national pension scheme. Additionally, in December 2018, the Government had announced plans to raise state contribution from 10 to 14 per cent of basic salary, and the ability to withdraw 60 per cent of the pension funds without taxation. Meanwhile, over the past five fiscal years, the Indian GDP registered an average growth of more than 7.5 per cent, marking a new normal for the world’s fastest-growing major economy. India’s US$2.6 trillion economy is expected to reach US$7.5 trillion to become the world’s third biggest by 2050, crossing Germany, France and the UK.
In 2014, Government of India had raised tax-exempt investment limits from around US$1,450 to around US$2,170 to encourage further saving. Since then, an additional investment of around US$730 has been allowed under the National Pension System (NPS). Meanwhile, financial decision making in India has also been encouraged by the proliferation of financial technology (fintech) services such as internet banking and insurance, among others. The Aegon report added that while 58 per cent of workers globally have a plan in place for retirement, a substantial 83 per cent of workers in India surveyed do so. The report had surveyed 1,000 people in India, including 900 workers and 100 retirees. The survey’s findings will boost confidence in India’s finance sector, spanning banking, insurance, investment, credit and real estate. This in turn will serve as an enabler for the nation’s economy, supporting job creation and future growth.