India Retirement Trends in 2020

India, with a population of around 1.33 billion is the second-most populous country in the world after China, which has a population of 1.41 billion. Over the last 20 years, India has gone through major socioeconomic transitions – capped off by an increase in foreign investment helping boost its economy. 

In the last decade, India has been transformed into one of the fastest-growing major economies in the world. Compared to some of the other countries in Asia, India also has much younger overall population – in 2020, the median age is estimated to be around 28, compared to 48 in Japan and 37 in China. This has meant that India is currently in the stages where the majority of its population is maturing into working age and thinking about retirement planning.

This is also the point in time when a country’s economy tends to grow fastest and typically, a younger workforce will relocate to urban areas. As urbanisation begins to impact people’s plans for retirement and a younger workforce – historically dependent on family – reach retirement age, there’s potential that the elderly will be left alone to manage for themselves.

A young workforce is usually a positive but it’s important to remember that while the total population is expected to grow by 27% over the next 30 years, the over-60s population is expected to grow by 171% during the same period. This will represent a huge change in the general population structure of India and because the growth is so rapid, the transition is expected to be equally swift.

Indian Retirement Trends

On average, working people in India expect to retire at age 61 – perfectly in line with the global mean but expect to live to 73, significantly lower than the global average expectation of 81. This translates to a retirement of 12 years against the global average of 20.

Because of general economic volatility, property is seen as the best way to save for retirement and was voted for by 51% of respondents to the HSBC ‘Shifting Sands’ report. When compared to other investment vehicles, property is a clear winner – stocks and shares was voted for by 31% and personal pension schemes were only preferred by 28%. 

Much like many other regions, these aspirations don’t match reality. Only 9% of working age people have accounted for property in their retirement plans and a large majority (57%) expect employer pension schemes to be their main source of funding. 

In terms of investment, 60% of working age Indian professionals believe they’ll need to move their money from savings into investments and 68% actively move money around to find the most value, much higher than the global average of 47%. There is no real appetite for risk and only 44% of working age people are willing to make risky investments to ensure financial stability. 

India is also the region most focused on actively-seeking information to guide their financial decisions – 72% of Indian respondents look for research prior to making a major financial decision. 

India’s preferred funding methods for retirement:

51% of working age people think property delivers the best returns 

46% – cash savings

38% – employer pension schemes

31% – stock/shares

28% – government/corporate bonds

10% – buying a business

India Adjusting Retirement Plans

Based on how current retirement saving is progressing, 17% of working age Indians think they won’t be financially comfortable when retired and 14% have not started saving for retirement. At the same time, constant change is making it difficult for people to plan ahead – 52% of people believe their plan won’t be applicable by the time they retire. 

With this in mind, 67% of people say they will continue working throughout retirement to some extent. 41% would work longer or get a second job to sustain their saving for retirement.

In terms of generational planning, Indian millennials tend to start saving for retirement at age 27 and 16% of millennials have not yet started saving at all. 65% of millennials are concerned about running out of money affecting their retirement and 68% are prepared to cut back on their expenses in order to save. When measured against Generation X and Baby Boomers, Millennials are more open to taking investment risks (48%).

With a much younger workforce then the global average and a rapidly ageing population, India’s general workforce has an excellent foundation for retirement planning. The majority of Indian respondents in the HSBC research realise that investing is most likely necessary, however many aren’t utilising their preferred investment vehicle – property.

At the same time, government changes to pension policy is confusing retirement plans. This is where property can also help, providing a tangible and long-term solution for Indian professionals.

Data Source: HSBC ‘Shifting Sands’ report.