The question of whether Indians are financially prepared for retirement presents a mixed picture, with some data suggesting growing awareness and participation in retirement schemes, while other reports highlight significant gaps and challenges.
Challenges and Concerns:
- Low Retirement Preparedness Index Ranking: India ranked 45th out of 47 countries in the 2023 Mercer CFA Institute Global Pension Index, indicating significant room for improvement in its retirement systems. (Morningstar, 2024)
- Lack of Prioritization and Early Saving: A significant factor contributing to inadequate retirement preparedness is the lack of prioritization. Studies show that nearly half of participants have not started saving for retirement, and 90% of Indians aged 50+ regret not saving earlier. (Morningstar, 2024; Bandhan Mutual Fund)
- Expectation-Action Gap: A recent national survey revealed that over 50% of working Indians expect a monthly pension of more than ₹1 lakh in retirement, but only 11% believe they are on track to meet that target. This highlights a considerable disconnect between aspirations and actual planning. (Enrichwise, 2025)
- Dominance of Informal Sector: A large portion of India’s workforce (around 81% in 2022) is in the unorganized and informal sectors, where they lack access to formal occupational pension schemes available in the organized sector. (PFRDA, 2025)
- Reliance on Traditional Schemes and Limited Diversification: Approximately 83% of participants in a survey relied largely on three retirement products: EPF, gratuity, and NPS. This suggests limited diversification in retirement portfolios. (Times of India, 2025)
- Insufficient Savings Contributions: The majority (74%) of respondents contribute between 1% and 15% of their salary toward retirement plans, which is often insufficient to build a substantial corpus, especially considering inflation and increasing life expectancy. (Times of India, 2025)
- Inflation and Healthcare Costs: Inflation constantly erodes the purchasing power of money, and healthcare costs in India have been averaging 10-15% annually, significantly higher than overall inflation rates. This poses a major threat to retirement savings. (Right Horizons)
- Low Financial Literacy: Despite an increase in financial literacy, the realization to plan for retirement has not fully translated into proactive investing. Many individuals lack knowledge about where to start or believe they have sufficient family wealth to rely on. (Bandhan Mutual Fund)
- Early Retirement Aspirations vs. Savings: A significant portion of young Indians (43% of those 25 or younger) wish to retire between 45 and 55 years, much earlier than the conventional retirement age, but most are saving less than 15% of their income, often inconsistently. (Business Standard, 2025)
Positive Developments and Progress:
- Increased Awareness: There’s a growing awareness about the importance of financial savings and their usefulness. (IndBiz, 2019)
- Growth in Financial Savings for Social Security: The share of financial saving for social security, such as insurance and pension, has shown a steady increase from 32% to 38% between 2013-14 and 2023-24. (PFRDA, 2025)
- Increased Participation in Pension Schemes: The National Pension System (NPS), including Atal Pension Yojana (APY), has seen significant enrollment, with 7.3 crore subscribers under APY. (PFRDA, 2025)
- Government Initiatives: The government has introduced various schemes like Atal Pension Yojana (APY), Pradhan Mantri Shram Yogi Maan-Dhan Yojana (PM-SYM), and National Pension System (NPS) to provide social security and encourage retirement savings, particularly for those in the unorganized sector. (e-Shram)
- Rising Life Expectancy: While presenting a challenge in terms of needing a larger corpus, increasing life expectancy also provides more time for individuals to save if they start early. (Finshots, 2025)
- Focus on Goal-Based Investing: There is a growing understanding that retirement is a goal that requires dedicated, goal-based investing. (The Financial Express, 2025)
Conclusion:
While there is increasing awareness and participation in retirement schemes in India, the data strongly suggests that the majority of Indians are not adequately financially prepared for retirement. Significant challenges remain, including low financial literacy, insufficient savings, high reliance on traditional schemes, and the overwhelming presence of the informal sector with limited pension coverage. The gap between retirement aspirations and actual savings is a major concern.
For Indians to be truly financially prepared for retirement, there needs to be continued emphasis on:
- Increased financial literacy and awareness about the importance of early and consistent saving.
- Diversification of investment portfolios beyond traditional schemes.
- Expansion of formal pension coverage to the unorganized and informal sectors.
- Addressing the impact of inflation and rising healthcare costs through strategic planning and appropriate insurance.
- Encouraging higher contribution rates towards retirement savings.
