We are entering the age of no pension. With increased life expectancy, India’s population is ageing at a pace never seen before, with nearly 148 million individuals expected to be over the age of 60 by 2031. Meanwhile, the formal retirement coverage in the country remains severely inadequate, with only one in 10 Indians estimated to have some kind of pension benefits.
Moreover, in a country where nearly 88% of the total workforce is engaged in the informal sector, only 3-4% of such employees have pension coverage. Even in the formal sector, less than a third of the employers tend to set up a superannuation fund for retirement purposes for their workers.
“The Indian household finance landscape is distinctive through the near total absence of pension wealth,” said the July 2017 report of the government’s Household Finance Committee. Even the benefits of the government-backed provident funds and pension schemes are typically not enough to generate a substantial retirement income, leaving most Indians to fend-off the later years on their own.
In other words, the youngest country in the world is fast approaching the age of retirement and, with limited systematic fallback options, it is increasingly looking at investment in insurance as its financial shelter in the elderly years.
What should you do?
Through unit linked insurance plans, you can self-sponsor your post-job finances through a customized retirement plan which can provide you with a combination of life insurance cover and market-linked investment growth.
ULIPs tend to hit the sweet spot between risk and reward for the investors, as they generally provide better returns than PFs and bank deposits and carry a lower risk when compared to mutual funds.
While the recent boom in the domestic equity market has led to a surge in capital flows in mutual funds, their penetration in the pension scheme category continues to be benign at around 0.1%, whereas life insurers have steadily gained market share.
Apart from a lack of awareness and lower tax benefits, mutual fund pension plans are also plagued by a patchy performance in comparison to relative stability and better returns ULIP returns. These schemes, available online, are among the top-rated ones in the industry, as rated by independent investment research agencies such as Morningstar and CRISIL and give up to 25% returns over a 5-year investment period.
When should you do it?
Most Indians start to amass financial and physical assets after reaching the age of 35, which leaves little room for riskier investments when planning for retirement, according to the Household Finance Committee report. Also, one in five citizens considers medical emergencies as the top threat to their financial stability which leads to further risk aversion in investments.
A recent report by Ernst and Young estimated that Indians save less than half of their optimum post-retirement coverage, largely due to lack of awareness, planning and financial resources.
In such a situation, it is necessary to understand your future requirements and start planning from an early age. Additionally, price inflation and medical inflation can create a huge unpredictability for the adequacy of retirement savings.
Therefore, you must not lose any more time in planning your retirement. ULIPs give you the facility to calibrate your investment according to your risk appetite so that you can generate substantial wealth even if you are running a little behind on your post-job planning.
With Finserv MARKETS, you can buy ULIPs customized for retirement planning which provides long-term financial security through a single investment.
By offering such tailor-made premium payment options, payout and maturity benefits, tax savings, and reliability, we are just playing our part in bridging the gap between the needs and the capacity of an ageing India.
To know more on ULIP investments in depth, you can check out these blogs:
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