Retirement from work is something that we will all face in the near future. It is often said that one should start preparing for retirement from the day one starts working. That, however, is easier said than done. So, how do Indians fare when compared with people from around the world when it comes to planning for retirement.
According to a report by HSBC, 29 percent of non-retired people are not preparing adequately or at all for a comfortable retirement (compared with 56 percent globally), of which 10 percent (compared to 18 percent globally) expect they will never make up the shortfall.

Based on a survey of over 15000 consumers in 15 markets, the report is aimed at finding out people’s retirement needs and how they are preparing for it. The India report shows that 90 percent of the working age population in India, have been affected by events such as falling into debt, losing their job or the economic downturn. The event with the greatest impact stops retirement saving for an average of four years, resulting in an average retirement potential loss of up to Rs. 600,096 for a man and upto Rs. 509,376 for a woman

The study found out, a quarter -26 percent of people in India (compared to 26 percent globally) have had their ability to save for retirement significantly impacted by the economic downturn.
Of all those affected by the slowdown, 13 percent (compared to 28 percent globally) have had to stop all their savings for retirement.

“Just a year or two without saving can have a significant impact on your future income in retirement. When the economic downturn first hit and many people reduced or stopped saving, everyone expected the storm would eventually pass; but today’s shifting economic and social trends require people to think differently about their planning and prepare for the unexpected. Having a financial plan in place (whether informal, or better still formal) will on average result in greater retirement savings,” says Gannesh Bharadhwaj, Head Retail Banking & Wealth Management, HSBC India.

A need to prioritize the ‘here and now’ is one of the most troubling signs of economic woes. A third (31 percent) of those in India who have never saved for retirement blaming the cost of day-to-day living expenses (compared to 44 percent globally).

When asked to choose between saving for the short term goal of a holiday and the longer term goal of retirement, Indian respondents were the joint least likely to choose for a holiday, with only 35 percent doing so.
Over three-fifths (61 percent) said they would rather save for the retirement.

The study also showed how retirement savings are vulnerable to being raided to deal with serious financial hardship resulting from unforeseen life events, with 35 percent of pre-retirement Indian respondents (compared to 29 percent globally) admitting they would consider dipping into their retirement pot to cope with life events such as buying a home or paying for children’s education. The findings are described by HSBC as a time-bomb which would leave millions of people facing reduced standard of living in later life. Meanwhile, a loss of confidence in the face of economic uncertainty may have prompted people to put their retirement savings into cash deposits, in turn threatening to further stunt the potential growth of people’s retirement pots. More than half of non-retired people in India (59 percent) expect cash savings or deposit accounts to be part of their retirement fund (49 percent globally) compared to 36 percent (21 percent globally) in stocks and shares.

Retirement hopes and fears
To understand retirement savings needs in India, there is a need to understand people’s aspirations for later life. The most popular retirement aspiration is to spend more time with friends and family (61 percent). Furthermore, respondents in India are more willing than in most other countries surveyed to continue working in later life, with 44 percent expressing the desire to do so to some extent.

On average, Indians believe that a retirement income of Rs 1,116,200 per year will provide them with a comfortable retirement. Respondents expect to use a variety of sources to provide this income, but the biggest chunk will come from cash savings (22 percent), which rises to 30 percent amongst those approaching retirement age. Almost three-fifths (59 percent) are expecting to use cash savings in retirement, equal to the use of life insurance (chosen by 59 percent) as a source of retirement income.

The research also found that there are some life events that can derail people’s efforts to save for retirement. The most important of these is the cost of buying a home or paying a mortgage which affected half of respondents in India. Children’s education also emerges as an important obstacle, with over a third (36percent) saying that it impacted their ability to save for retirement.

Short-termism in savings behaviour
Another obstacle to retirement saving is the appeal of the short-term: immediate and perceived savings needs are more tangible and therefore may be given a higher priority than far-off goals like retirement. Respondents were asked to choose whether they would save towards a holiday or retirement, if they could only afford to save for one in a single year. It is encouraging that Indian respondents were amongst the joint least likely globally to choose the short term goal of a holiday: only 35 percent chose this option, whereas 61 percent opted to save for retirement. However, a significant proportion of Indian respondents are willing to dig into retirement savings as a means of dealing financially with an unforeseen crisis. About 35 percent would look to their retirement savings to get through serious financial hardship, though many more would use other savings (51 percent). Taken together, this means that whilst putting longer term savings goals first may boost contributions to retirement savings, the readiness to draw on long-term savings in an unexpected crisis will act to reduce the value of retirement savings for some respondents in India.

When do retirement saving & planning begin?
The findings show that saving (putting money aside for the future) and financial planning (evaluating the current situation, identifying future goals and taking action to achieve them) start at varying and different ages in the countries surveyed. On average worldwide, retirement saving starts four years before planning for retirement starts. In India the ‘gap’ is smaller, and saving begins later, on average at 28, with planning beginning at 29. Nevertheless, these average figures hide the fact that 35 percent of respondents in India have never saved for retirement at all.

Drivers of retirement
saving and planning
There are many different reasons why people begin to save for retirement, though fear of financial hardship in retirement is by far the most common motivator, chosen by nearly half (49 percent) of all respondents. Tax is a greater consideration in India than in other countries surveyed, with 28 percent beginning to save for retirement due to tax efficiencies.

How people make plans
for retirement
Financial planning for retirement can take several forms. The most common methods of retirement financial planning are informal such as people’s own calculations (53 percent). Encouragingly, respondents in India are more focused on retirement planning than the global average, with only 4 percent never having undertaken any planning for retirement. Globally, there is a positive relationship overall — the ‘planning premium’ — with 44 percent of people saving more for retirement as a result of having a financial plan, compared with only 31 percent who did not save more.
This relationship is even stronger in India, with over half of respondents (54 percent) saying financial planning led to increased saving for retirement, whilst only 33 percent say they did not save more.

On closer examination, the research findings reveal some further insights behind this encouraging headline. Of those who consulted a professional financial adviser for planning, 61 percent saved more for retirement as a result. Self-directed planning appears slightly less powerful: 54 percent of those who relied on their own thoughts and actions saved more for retirement. This direct relationship between financial planning and greater savings is not just a correlation, it is a cause and effect: on average, respondents say that financial planning led them to saving more for retirement.

Five actions that individuals can take to improve their
financial well-being in
retirement.

Action 1: Get real about your retirement needs
By thinking realistically about your future aspirations and needs, from foreign travel to healthcare costs, you will be able to better understand how much income you will need in retirement and how to best prepare for all the financial risks associated with growing older.

Action 2: Put your savings priorities in order
Work out a realistic budget that works for you and make sure that your long-term financial planning, including the need to save for retirement, is not overlooked against what might seem like more pressing financial needs.
Ring-fencing even a small amount of monthly income towards retirement planning can help to make a major difference in the future.

Action 3: Be aware of how major life events affect
saving for retirement
You never know when a life event may impact your savings, so where possible, you need to ensure that you have access to some emergency savings and investments as well as appropriate cover to deal with periods of unemployment and long-term illness which may prevent you from working.

Action 4: Make a plan for the future
Any type of financial planning for retirement, including informal ways such as using online planning tools or ‘to-do’ lists, is a good starting point. Eventually you should seek to draw up a detailed written plan for the future, which should be reviewed regularly.

Action 5: Use professional advice
to improve savings
Reviewing your savings situation and retirement potential with a professional financial adviser now can help to ensure that all your future retirement needs are identified and that comprehensive plans are put in place.