NPS more popular in north than south

Indians largely underestimate their post-retirement financial needs, given that planning for one’s twilight years ranks significantly low amongst the financial priorities of Indians, found HDFC’s first NPS Preference Index. 

The survey covered around 1,800 individuals across India, aged between 30-40 and 45-55 years. All the respondents, out of which 75% were men and 25% were women, had an annual household income of over Rs 7 lakh. 

Interestingly, inclination towards NPS, or the National Pension System remained largely uniform across men and women, metros and non-metros and amongst salaried and self-employed individuals. However, government employees, particularly in Northern India, registered greater interest in this retirement planning vehicle. 

The index stands at 54 points reflecting moderate awareness regarding NPS. For 69% of individuals in the survey, friends and family emerged as the key source of information and awareness regarding NPS, followed by social media and government advertisements. 

Greater confidence in NPS
The overall corpus under NPS recently crossed Rs 10,000 crore, with estimates of its AUM touching Rs 12,000 crore by the end of this financial year. For more than 58% respondents, tax benefits came across as the most appealing feature of NPS. Other major reasons why NPS has garnered wider acceptance and popularity are the safety it promises, being government regulated and minimum charges levied. Some other triggers that catalysed individuals to invest in NPS included a nudge by their financial advisor and a track record of good returns. 

In fact, 86% of those enrolled in NPS felt far more confident about their retirement as compared to 74% of those who had not joined the NPS ecosystem. According to the index, outliving one’s retirement corpus, suffering from a critical illness and unforeseen familial needs ranked amongst the most common post-retirement worries of individuals. 

In keeping with that, around 64% individuals anticipated at least one major healthcare related expense post retirement. Clearly, healthcare is a significant area of concern that surrounds retirement planning. 

However, the misperception that one’s current savings would suffice as retirement corpus, the lack of knowledge and prioritizing saving for other immediate financial goals came through as the biggest impediments of retirement planning. Particularly in metros, the belief that one’s existing financial resources would be adequate for retirement was higher in metro cities, as opposed to their non-metro counterparts.