Four out of five residents of Tier-2 cities will depend on their savings and children after retirement: Survey

India is experiencing a serious gap in its retirement planning, with 80% of individuals in Tier 2 cities yet to start strategising for their post-employment years. Relying predominantly on their savings and children, these individuals are facing a perilous future in the absence of a solid financial plan. 

BajajCapital, an investment firm, recently conducted a comprehensive online survey to evaluate the awareness levels of retirement planning among young adults in India. The results of this survey shed light on a remarkable trend: young adults in both Tier-1 and Tier-2 cities increasingly recognise the importance of planning for their retirement. 

In October, BajajCapital conducted this survey, reaching out to 5,500 adults across India, all falling within the age group of 35-60 years. The results revealed a significant shift in the mindset of young adults, with a strong focus on securing their financial future. 

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 sceptical about initiating their retirement planning. Notably, 70% of survey respondents hailed from tier-1 cities, with the remaining 30% from Tier-2 cities. 

Jai Bajaj, CEO of Retirement Business at BajajCapital Limited, added, “Retirement is a life goal that needs planning beforehand. Not many people can plan efficiently, and therefore, we are always committed to helping 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 pandemic has underscored the significance of financial security, and the results of this survey demonstrate the growing awareness among young adults in India. With life expectancy now reaching 100 years, planning for a worry-free retirement has never been more critical. 

Rajiv Bajaj, Chairman and Managing Director of BajajCapital Limited, said, “The outbreak of the pandemic has been a wakeup call for all of us in numerous ways, including retirement planning too. Unforeseen circumstances can strike at any point in time. Therefore, we need to plan in advance for a peaceful retirement.” 

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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 realization 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. 

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, many of the Indian population remain without a retirement plan. 

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 launching the National Pension System (NPS) and the Atal Pension Yojana (APY). 

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.