First savings survey shows majority have no retirement nest egg

Yet 40% in cities, 30% in villages don’t expect children to look after them, reveals govt-backed pension study


There couldn’t be a more fitting rebuttal to the CPM’s opposition to pension reform than the results of the first nationwide survey of saving habits and income patterns.

The survey, conducted by AC Nielsen ORG-MARG and commissioned by the Ministry of Finance, shows clearly the failure of the government to cater to the needs of old-age security of the first generation of Indians born in independent India who are near retirement.

It also shows that existing earners will be worse. As many as 94 per cent of existing earners are not currently saving and building up assets for retirement. Whatever savings they have, according to the survey, the most popular instrument is the one that yields the lowest real return—savings bank accounts. About 60 percent people use this instrument, mainly in nationalised banks.

The problem will be worse because they will expect to live an average of 25 years after retirement. These include shopkeepers, employees of small firms, farmers, the self-employed and workers in the unorganised sector.

The survey covered a sample of 40,862 households across all states, urban and rural areas and across all income classes.

One of the main objectives of the survey was to understand patterns of household savings behaviour with respect to old age security. In the next few decades the number of elderly in India is going to be much larger than it is today (at 88 million).

The survey shows that only 10 percent Indians save for old age. Another 10 percent are covered through mandatory pension and provident fund schemes. Eighty percent do not have adequate savings for their old age.

Interestingly, the survey shows that 65 percent of Indians are not even thinking about how to survive in old age. And, it is not as if they live in joint families, that they will be taken care of. Already 60 percent of families are nuclear.

The survey shows that the number of employees of formal private sector, at 12 million, is less than half the number of government, PSU and quasi-government employees who exceed 26 million. All these workers have some form of cover.

Out of India’s total labour force of 425 million workers, 61 million are unpaid family workers. They work, but do not see a paisa in their hands. There is no way they can save money.

Moreover, nearly 40 per cent people in urban India and 30 per cent people in rural India responded that they do not expect their children to take care of them. Yet, they still save for them. The three main reasons for saving are security of their family, education requirements and marriage of their children.

However, 26 percent of Indians, the survey said, do not save at all.

Every day 13,000 people in India turn 60, expecting to live an average of 17 years more, some more, some less.

This effectively means every year nearly 41 lakh people are becoming old without adequate preparation.


Ila Patnaik

Ila Patnaik