AMC Speak 5th May 2015
Which financial goal is highest in the minds of an Indian investor?
Himanshu Vyapak, Deputy CEO, Reliance MF
 

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What would you think scores the highest in an Indian investor's mind : buying a house, saving for retirement or saving for children? Reliance MF's Retirement Survey reveals that retirement planning scores higher than all other goals. What motivates investors to buy retirement plans? For those who don't, why don't they see the need to buy retirement plans? How do men think of retirement planning as opposed to women? When do investors typically begin saving for retirement? Read on as Himanshu shares with us interesting insights from Reliance MF's maiden Retirement Survey.

Friends,

I am happy to share with you that Reliance MF has come out with its first 'Retirement Survey', which presents findings from an online survey that was conducted by IMRB for RMF. The survey also delved into the TGI database, which is a semi-annual rolling sample covering over 30,000 consumers across different states and consumer categories, and also leveraged insights from IMRB's online panel which covers over 8 million consumers.

Time to understand the mindset of consumers towards retirement planning

India is a young country with the median age of it's population under 30 years. We have around 100 million people today above the age of 60 years, which is expected to triple to 300 million by 2050. This will pose a huge economic challenge for the country, if we do not plan for providing right retirement options today. With this study, we have made an attempt to understand the mindset of the consumer towards retirement planning.

Among consumers who bought retirement plans, "Enjoying retired life" and "Taking care of family" topped the reasons for the purchase. Among those who didn't buy a retirement plan, "Children will take care of me" was the most common reason cited.

Can Indians continue to depend on children for their retirement needs?

I believe that over time, consumers may need to re-think this premise for not buying a retirement plan. Studies have indicated that the joint family system has dropped from 35% to 31% in the last 5 years, Also, the number of people ( aged 41-55 years) living alone has increased from 31% to 34% since 2008. We are seeing a shift in the family structure which will have an impact on the retirement planning behaviour in the next 5 years.

Our survey reveals that Retirement planning is the most important financial goal for respondents, ahead of other goals including buying a house, education of children & marriage. The retirement planning goal is the most important for the 30-40 and 41-55 age groups.

The survey reveals that majority of the respondents prefer to invest in retirement plans between the ages of 30-40 years. More than 60% of the respondents said they would like to start saving for retirement before 40 years.

The survey also points out that Male and Female consumers have different motivations to opt for a retirement plan. While "taking care of my family" was the prime reason for male respondents intending to buy retirement plans, "I don't want to be dependent" was the top reason for females.

90% of retirement assets are in fixed income - this ought to change

India today has approximately 15 lakh crore of retirement assets - including EPFO, exempted Provident Funds, superannuation & gratuity funds, NPS, PPF and Insurance - of which over 90% are currently invested in fixed income options. The government has been sensitive to expand this portfolio and allow these retirement funds to invest in equities in a calibrated manner. We see this as a strong move that will enable superior returns in the long term for investors.

Reliance Retirement Fund, the first CBDT approved equity focussed retirement fund offering benefit under Sec 80 C to investors, has raised over Rs 200 crore from over 40,000 investors in a span of last 3 months. Over 85 percent of the investors have opted for the SIP option and chosen the equity route to plan for their retirement.

We are seeing a steady acceleration towards investments in equity based retirement fund. Our total commitment from SIP's in Reliance Retirement Fund is over Rs 1,300 crore till date. We believe that the overall contribution of such funds, which is miniscule today, will grow manifold in the coming years. Our plan is to enrol over one million customers for this option in the next three years.



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