Friday, July 4, 2014
India Ranks First in the AEGON Retirement Readiness Survey 2014
July 4, Mumbai: AEGON Religare Life Insurance (ARLI), today, released the India report on the AEGON Retirement Readiness Survey 2014 - Changing Face of Retirement. In the 15-country online survey that was carried out jointly by ARLI’s parent company - AEGON and Cicero Consulting, India participated for the very first time and ranked first on the AEGON Retirement Readiness Index (ARRI), ahead of BRIC counterparts - Brazil and China.
The research team developed the AEGON Retirement Readiness Index (ARRI) to better assess how well employees view their level of retirement preparedness. The India Index score of 7 is the highest of all 15 countries surveyed. This means that an ‘average’ or ‘typical’ Indian with online access has only a ‘medium’ level of retirement preparedness. 49% of the Indian employees surveyed, claim to be habitually saving, compared with 38% of the global sample.
On the release of the India report, Mr KS Gopalakrishnan, Managing Director & Chief Executive Officer of AEGON Religare Life Insurance (ARLI) said, “India is an emerging market for pensions and annuities. With the outcome of the Retirement Readiness Survey where India has ranked first on the retirement readiness index, we are confident that there exists a huge potential for specific pension and annuity plans. With AEGON’s global expertise in this segment, we are hoping to bring in products to satisfy the retirement appetite of the Indian consumer.”
The India report reflects the dynamism, common to emerging markets, and is also linked to the strong savings culture engrained in the Indian society. The economy is young and vibrant; and many Indians are optimistic of the future prosperity. This survey finds that those who have access to a pension are largely confident about their retirement. Yet this group represents only a minority of a population that faces much more extensive challenges to retirement readiness. In the period of prosperity that drives young Indians optimism for the future, the challenge for retirement readiness will be to distribute these gains among all of society.
Positive Aspirations and Expectations
Respondents in India are amongst of most positive of all the countries surveyed, both with regard to expectations for the economy and their own financial situation in the next 12 months:
- 48% expect the economy to get better;
- 57% expect their own financial situation to get better;
- 45% believe that future generations of retirees will be better off than those currently retired.
37% (double the global average of 19%) of workers are confident that they will be able to fully retire with a lifestyle they consider comfortable and 43% of fully retired Indians are confident that they will always be able to live in retirement comfortably.
- 61% claim to have a plan for retirement, but not one which is written down.
- 53% claim to have a back-up plan in case they are unable to continue working before planned retirement age is reached. For 74% of those with such a plan, savings will be used.
Indians (both workers and those already fully retired) are using a range of instruments to invest in for retirement:
- Fixed deposits (59%) and Life insurance (54%) were mentioned by over half of those surveyed.
- Other popular instruments include: Provident Funds (47%), gold (41%), property (40%), pension funds (NPS) (37%), and mutual funds (35%).
With regards to the type of pension plan, twice as many Indians would choose a ‘lower return, guaranteed’ pension over one that offered higher returns but more uncertainty (62% vs. 31%).
Making Saving Easy
- 65% say that lack of money to invest is an obstacle to saving for retirement
- A pay rise would encourage 41% to save for retirement
- Easy-to-use access to tracking and managing retirement savings would encourage 39% to save
- 37% would do so if they received a better retirement plan match from their employer
- Auto-enrolment being offered by an employer is regarded as a reasonable way of saving for retirement
- 61% would either prefer to receive a regular income (such as an annuity payment) or receive a mix of a lump sum and a regular payment).
A Flexible Transition
- 58% expect some sort of transition, either by changing the way they work (e.g. working part-time or on temporary contracts) before eventually giving up paid work (35%), or by changing work and continuing in some capacity throughout retirement (23%)
- 32% of Indian workers claim their employer offers work, more suitable for older workers (e.g. less stressful or physically demanding work), and 31% are offered the option to move from full-time to part-time working. The same proportion of workers claim they are offered flexible retirement plans which allow working beyond the usual retirement age.
- 34% are offered financial advice (compared with 13% globally) and 32% are offered employer provided healthcare in retirement (16% globally).
- 54% of Indian workers believe their employer provides them with enough information and support to help with retirement planning.
- 46% believe that there has been no difference in the provision of information and support.
- Widening pension coverage through automatic enrollment: Given the experience in other countries, automatically enrolling employees into workplace pension arrangements could play a significant role in achieving the need for wider private pension coverage.
- Developing simple savings and investments which help people manage long-term finances: Indians are increasingly able to save for their long-term finances and undertake retirement planning. Policymakers need to facilitate this process through encouraging the further development of third pillar (personal) pension products and other long-term savings products which can help Indians manage long-term investment risks and meet future retirement income needs through offering guaranteed pay-outs. The need to create simple savings and investment products should be a key consideration in this process as well as the need to ensure that these products are appropriately incentivised through the tax system.
- Developing a broader understanding of financial planning needs through a national financial education program: Indians require much greater knowledge about retirement planning to help them keep up-to-date with product and investment decisions in a fast changing market place in the coming years. Building general levels of financial awareness, awareness about retirement planning choices, the requirement to consider annuities and other income generating options in retirement should be a major priority for policymakers.
About the Survey
The findings used in the India report are based on the responses in India of a 15-country online survey, in which 16,000 adults aged 18 and over were surveyed. Fieldwork was conducted in January and February 2014. The 15-country survey report as well as other country reports, research and communication materials can be found at www.aegon.com/en/home/research. The range of issues covered in the research includes attitudes to retirement preparedness, which serve as the basis of the annual AEGON Retirement Readiness Index, as well as the role of the government and employers in providing retirement benefits. In India, 900 employees and 100 fully retired people were surveyed to provide a contrast between the responses of current workers and those already in full retirement. All findings in the report are based on the Indian survey results unless otherwise stated. The survey did not include the views of the self-employed, students, homemakers, and those not currently employed or unable to work as each of these groups faces specific challenges in planning for retirement which require specific public policy interventions. Instead, the objective in this survey is to provide a broader perspective based on the mainstream working and retired populations.
About Cicero Consulting
A leading consultancy firm servicing clients in the financial and professional services sector, Cicero specializes in providing integrated public policy and communications consulting, global thought leadership programs and independent market research. Cicero was established in 2001, and now operates from offices in London, Brussels, Washington, New York and Singapore. As a market leader in pensions and retirement research, Cicero designed and delivered the market research, analyzed the research findings and contributed to the report. More information: cicero-group.com.
About AEGON Religare Life Insurance Company
AEGON, an international provider of life insurance, pensions and asset management, Religare, India’s leading diversified financial services groups and Bennett, Coleman & Company, India’s largest media conglomerate, have come together to launch AEGON Religare Life Insurance Company Limited (ARLI). This venture is dedicated to build a customer-centric business and provide a work environment that fosters excellence and innovation. This joint venture adopts a local approach with the power of global expertise. ARLI launched its pan-India operations in July, 2008 following a multi-channel distribution strategy with a vision to help people plan their life better. The fulfillment of this vision is based upon having a complete product suite, providing customised advice and enhancing the overall customer experience. ARLI has launched a suite of products that are focused on providing the customer with the means to meeting their long-term financial goals. At the same time, product development has been founded on the tenet of providing the customer with great value. In 2014, the Indian Insurance Awards, honoured ARLI as the ‘E-Business Leader’, for the second year in a row, under the category of Overall Insurance Industry Awards.
As an international provider of life insurance, pensions and asset management, AEGON has businesses in over twenty five countries across the Americas, Europe and Asia. AEGON companies employ almost 27,500 people serving millions of customers around the world. In total, the company oversees EUR 482 billion in revenue-generating investments. AEGON is one of the largest insurance companies in the United States, and ranks first in the Dutch group pensions market and has strong market positions in individual and group pensions in the UK. The company’s shares are listed on two major stock markets: Amsterdam and New York. AEGON has more than 160 years of experience with its roots going back to 1844. http://www.aegon.com
About Religare Enterprises Limited
Religare Enterprises Limited (REL) is one of India’s leading diversified financial services groups and offers an integrated suite of financial services including asset management, life and health insurance, lending, broking, investment banking, and wealth management. Religare Enterprises is headquartered in New Delhi and is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India. Religare is also building an Asia & emerging markets focused Institutional equities and Investment Banking business and a multi-boutique global asset management platform to tap the broader opportunities offered by the most promising emerging markets around the world. http://www.religare.com