Successful Retirement Healthy Aging and Financial Security

Transcription

1 India Country Report Successful Retirement Healthy Aging and Financial Security The Aegon Retirement Readiness Survey 2017

2 Contents Introduction 3 Key Findings 4 The 2017 Survey Part 1 The state of retirement readiness and aspirations for retirement 6 Part 2 Financial security 10 Part 3 Healthy aging 15 Part 4 Making the link between health and retirement preparations 18 Part 5 Successful retirement Healthy aging and financial security 19 Part 6 The important role of employers 21 Recommendations 24 Note: Percentages are shown to zero decimal places. Rounding percentages to the nearest whole number may result in the percentages in some charts summing to slightly under or slightly over 100%. 2 The Aegon Retirement Readiness Survey 2017

3 Introduction Welcome to the sixth annual Aegon Retirement Readiness Report. The Aegon Center for Longevity and Retirement, together with Transamerica Center for Retirement Studies and Mongeral Aegon Instituto de Longevidade, is proud to present the Successful retirement Healthy aging and financial security Aegon Retirement Readiness Survey 2017 India country report. This report, while specific to India, is based on research conducted in 15 countries spanning Europe, the Americas, Asia and Australia. Countries around the world are facing unprecedented change. The concept of retirement is evolving; life expectancy continues to increase; pressures on governments and pension systems are intensifying; and, greater responsibility is shifting to the individual. These factors present both new challenges and pressures, as well as opportunities that this report will explore. Wealth has and will always play an important role in shaping the retirement outlook for workers once they decide to stop working. However, health is playing an ever more important role both in terms of how workers are able to build up the funds they need to enjoy a comfortable retirement but also in how able they are to enjoy and manage out-of-pocket healthcare-related costs in their ever-increasing years in retirement. Retirement is no longer seen as a period of decline but as a period of activity. Many plan to continue working throughout retirement, or carrying out other leisure activities such as traveling or pursuing new hobbies. Whatever retirement has in store for today s workers, it is likely that it will be more active, and longer-lasting than their grandparents and even parents could have imagined. This report focuses on the responses to an online survey of 1,000 people in India, including 900 workers and 100 retirees. The report evaluates the retirement readiness of Indian workers as well as their retirement aspirations. Considering the nature of the survey in its online format, a higher proportion of its respondents live in urban areas (where internet penetration is higher) than would fall out naturally and thus represent more middle- and high-earning workers. In India a large proportion of rural workers that do not have access to the internet are under-represented in the India sample. The report examines what steps they can put in place to best save for retirement and the importance of maintaining good health in realizing retirement aspirations. It further looks at the important role employers play in helping workers prepare for the future and provides recommendations for individuals, employers and the government. The Aegon Retirement Readiness Survey 2017 finds that Indian workers score highest among the 15 countries surveyed when it comes to retirement preparedness. Indian workers also take their health seriously, with many establishing health habits today in order to safeguard their future health in older age. While Indian workers feel they are doing well in terms of retirement preparedness, especially compared to respondents in other countries, there is more that can be done to make sure that they are retirement ready. Conversely perhaps to other countries in the survey, the changes required tend to be more structural in nature in terms of the retirement options provided to them by both employers and private savings products. The Aegon Retirement Readiness Survey

4 Key Findings India ranks first in the 2017 Aegon Retirement Readiness Index. With an ARRI score of 7.6, India once again falls into the medium retirement readiness band, and well above the global average of 5.9. India s ARRI score has risen from 7.3 in 2016, with its retirement readiness continuing to improve at a pace the other countries surveyed are unable to match. Indian workers and retirees expect their own savings and investments to fund over two-fifths of their income in retirement. Indians expect the greatest portion of their retirement income to be funded by their own savings and investments (43 percent), surpassing the amount expected globally (30 percent). Only 27 percent is expected to come from the government, compared to 46 percent globally. Comparatively, 30 percent of retirement income is expected to come from employers, higher than the 24 percent globally. Three-in-five Indian workers (59 percent) are habitual savers, outstripping the global average (39 percent). Habitual savers are defined as those who say they always make sure they are saving for retirement. Only two percent of Indians surveyed identify themselves as non-savers those who have never saved for retirement and don t intend to. Habitual savers enjoy a brighter retirement outlook. Nine-in-ten (90 percent) of Indian habitual savers are aware of the need to plan financially for their retirement; this compares to 83 percent of those who save on an occasional basis, 74 percent of those who have saved in the past and 61 percent of those who are aspiring to save. Four-in-five (81 percent) habitual savers in India have a good idea of the total value of their personal savings for retirement, compared to 61 percent of those who only save on an occasional basis, and half of those who no longer save (51 percent). Almost a third of Indian workers surveyed have a retirement plan in writing. Almost nine-in-ten (87 percent) of Indian workers have a retirement strategy, far surpassing the global average (58 percent). Thirty-one percent can be defined as strategists they have a written strategy for retirement, more than twice the amount globally (14 percent). Strategists are well-positioned to achieve retirement readiness. Ninety-four percent of strategists are aware of the need to plan financially for retirement compared to 83 percent among those with a non-written plan, and 69 percent among those with no plan at all. Strategists are more likely to say they always make sure they re saving for retirement (75 percent, compared to just 32 percent of those with no retirement plan), and are significantly more confident in achieving a comfortable retirement (78 percent) than those with no plan (32 percent). Retirement strategies incorporate both precarious and sturdy contingencies for weathering unforeseen circumstances: Over two-thirds (68 percent) Indian workers have a backup plan to provide them with an income should they become unable to continue working before they reach their retirement age. Yet, often these plans might prove to be insufficient protection for Indian workers should they be needed. The most commonly-cited backup plan is relying on savings (69 percent) which may have negative repercussions in later life should this safety net be quickly depleted. Encouragingly, products specifically formulated to address the issue of forced early withdrawal from the workplace actually feature towards the top of most popular backup plan options. Two-fifths (40 percent) of Indians with a backup plan would rely on income protection compared to 19 percent globally, and 29 percent on critical illness insurance compared to 21 percent globally. Health is a key factor in securing a comfortable retirement. The majority of people in India self-report their health as either good or excellent (82 percent), far above the 68 percent globally. Almost a quarter of Indians (24 percent) report their health as excellent, whilst a further 57 percent self-report their health as good. At the other end of the scale, the majority of the remaining 18 percent say that their health is fair (17 percent) and just one percent say it is poor. The amount of Indians in excellent health falls to 22 percent of those aged 55-64, and just 15 percent among those aged 65 or above. 4 The Aegon Retirement Readiness Survey 2017

5 Indian workers in excellent health are better-positioned to achieve retirement readiness. Indian workers in excellent health are far more likely to be strategists (49 percent compared to 26 percent of those in good health and just 20 percent of those in fair health). Almost three-quarters (74 percent) of Indian workers in excellent health are habitual savers, higher than among those in good health (57 percent) and fair health (47 percent). Ultimately those in excellent health are much more confident that they will be able to achieve a comfortable retirement (84 percent of those in excellent health, 51 percent of those in good health, and just 34 percent of those in fair health). Over half of Indian workers (55 percent) say their employers offer the ability to work past normal retirement age. Over a third (36 percent) are offered the option to move from full-time to part-time working. Almost all Indian workers (98 percent) would be interested in one or more health or wellness-related perks if their employer were to offer them. Short-term day-to-day benefits, such as providing healthy food or snack options at the office (54 percent) and access to exercise programs (49 percent) are amongst the most sought-after. Indian workers expect to retire at 60. The median age Indian workers expect to retire at is 60 years, in line with a recent proposal from the Indian government to increase the retirement age of private sector employees from 58 to 60. Those in fair or good health expect to spend a further 15 years living in retirement (as per the national median), while those in excellent health have considerably higher expectations with a median 20 years. Health in older age is a concern to 83 percent of Indians, similar to the 82 percent globally. However, Indians rate its importance more highly: just shy of three-in-five (59 percent) Indians say that it is their primary concern (i.e., it is something they are consider regularly and are actively working toward prolonging), compared to 43 percent globally. Three-quarters of Indian workers envision a flexible transition into retirement. Just a fifth of Indian workers (22 percent) expect to stop working immediately upon reaching retirement age. Comparatively, 35 percent expect to change the way they work by working part-time or taking on temporary contracts before eventually giving up work altogether. A further fifth (21 percent) expect to change the way they work but to continue working in some reduced capacity throughout retirement. While three percent are not sure yet of how they plan to transition into retirement, a considerably substantial 19 percent of Indian workers say they envision to continue working as they currently do and that retirement age will not make a difference in the way they work. The Aegon Retirement Readiness Survey

6 Part 1: The state of retirement readiness and aspirations for retirement The Aegon Retirement Readiness Index (ARRI) was developed to measure levels of retirement readiness across the participating countries and the ARRI methodology remains at the heart of the study. The ARRI provides an annual score based on responses to six separate questions: three broadly attitudinal (questions 1, 2, and 3) and three broadly behavioral (questions 4, 5, and 6). These questions are illustrated in the diagram below. What factors shape the ARRI score? Income replacement Personal responsibility Do you think you will achieve the level of income you think you will need in retirement? 6 1 To what extent do you feel personally responsible for making sure that you will have sufficient income in retirement? Financial preparedness Thinking about how much you are putting 5 2 Level of awareness How would you rate your level of awareness aside to fund your retirement, are you saving on the need to plan financially for your enough? retirement? Retirement planning 4 3 Financial understanding Thinking about your own personal retirement planning How able are you to understand financial matters process, how well developed would you say that your when it comes to planning for your retirement? personal retirement plans currently are? The ARRI ranks retirement readiness on a scale from 0 to 10. A high index score is considered to be between 8 and 10, a medium score between 6 and 7.9 out of 10, and, a low score being less than 6. Achieving a score of 7.6 this year, India once again ranks top in terms of retirement readiness index. What is most notable is that India s ARRI score has risen by 0.3 in the past year from 7.3 in 2016, which was already a sizeable improvement from the ARRI score of 7.0 recorded in 2014 and Retirement readiness is not only high in India, but continues to improve at a pace the other countries surveyed are unable to match. This may be attributable to a burgeoning economy in India, with annual GDP growth standing at 7.1 percent in 2016¹. Accordingly, 64 percent of the survey s respondents expect the economy in the country to improve over the next 12 months, and 70 percent expect their own financial situation to get better over the same timeframe. ¹ World Bank, GDP growth (annual %) India 6 The Aegon Retirement Readiness Survey 2017

7 Chart 1: India places first in the 2017 Aegon Retirement Readiness Index 5.9 = = Total 2017 Japan Spain Hungary France Poland Turkey Netherlands Germany Canada Australia United Kingdom China Brazil United States India Another reason for the increasing feeling of retirement readiness among Indian workers might be the rising popularity of the National Pension Scheme for civil service workers introduced in 2004 and its 2009 extension for all Indian workers on a voluntary basis. Furthermore, Indians are increasingly putting aside more money for the future, as can be seen in chart 2. This can be across savings bank accounts, fixed deposits, the Public Provident Fund and the National Savings Certificate, for example. The rise in household savings can be attributable to a number of factors in India, from growing financial inclusion (account ownership grew from 35 percent to 53 percent between 2011 and 2014²), deregulation of interest rates on savings bank deposits in 2011 to drive more competition amongst banks, and indeed more recently the 2016 demonetization of banknotes, which saw a rise in Indians holding their money in financial products rather than physical assets.³ Total personal household savings in India have increased year-on-year for the past decade, more than doubling from INR 9,944bn in 2007 to INR 26,099bn in Chart 2: India s household savings, ⁴ , ,21 INR Billion , , , , , , , , Source: Tradingeconomics.com : Ministry of Statistics and Programma Implementation (MOSPI) ² World Bank Group, The Global Findex Database 2014: Measuring Financial Inclusion around the World. Accessed 9 November 2017 ³ Live Mint, Demonetisation has pushed households towards financial savings, 2 September Accessed 9 November 2017 ⁴ Trading Economics, India household savings, accessed 17 August 2017 The Aegon Retirement Readiness Survey

8 Yet, pension provisions in India are still in the process of being normalized into everyday behavior, with the aid of policy pushes to form more robust coverage. India s pension policy is formed in the main through voluntary earnings-related employee pension scheme, in a DC contribution-based pension system. However, although 35 percent of respondents are using a defined contribution plan to prepare for retirement, coverage is by no means universal in India. The Global Age Watch Index 2015 reported that 29 percent of those aged over 65 were in receipt of a pension, far below other nations in the BRICS economic grouping (China 74 percent; Brazil 86 percent; Russia 100 percent; South Africa, 93 percent)⁵. For those without, this can be attributed in part to the nature of the proliferation of the informal labor market rife in India, where workers have no real stable employer to hold a pension with. To try and combat this, in 2015 the Indian government announced in its budget the introduction of Atal Pension Yojna, entitling workers of this sector up to R5,000 per month from aged 60 onwards. In this the government would match contributions per year up to 1,000 for up to five years. Despite these positive developments, the macroeconomic outlook presents challenges. The World Economic Forum estimated that the retirement savings gap in India in 2015 stood at $3tn, and predicts this to accelerate by 10 percent per year to hit $85tn by 2050.⁶ By this point there will be around 300 million retirees, and increased quality of life and wage growth that comes as India continues to develop will push up expectations for retirement income. As well as changing policies, shifts are underway in India that may yet affect the retirement landscape for its elderly population. Life expectancy at birth is on the rise in India, from 59.2 years for those born between to 67.6 for those born between , and predicted to rise further still to 74.2 for those born between Although India s population is expected by the UN to surpass China s within the next few decades, its fertility rates are predicted to drop from the above-global-average 2.44 in to 2.10 in , and down to 1.86 in Set to rise also is the amount of the population aged 60 or above, which has already grown from 77 million in 2001 to 104 million in 2011, with the elderly population expected to sit at around 300 million by 2050, accounting for 20 percent of the total Indian populace. 9 There is more to the developing narrative of aging in India than biology. Traditionally in India, children (typically the son) looked after and supported their parents as they became older, moving into the family home and providing upwards generational care, with older generations revered as head of the family. However, as prosperity and opportunity grow in India as it continues its economic development, family structures have shifted. As younger nuclear units become wealthier and mobile as they progress through careers, the conventional generational structure is starting to decline. This change will of course be slow. At present, 72 percent of those aged 80-plus in India report being financially dependent on others, and over 80 percent live with one of their children. 10 This is reflected in the survey findings, with 48 percent of Indian workers expecting to provide financial support for their aging parents when they are retired, compared to 20 percent globally. Similarly, 38 percent of Indian workers expect that they will need financial support from their children in retirement, compared to just 16 percent of workers globally. India s Maintenance and Welfare of Parents and Senior Citizens Act 2007 has made it a legal obligation for children and heirs to provide maintenance for their parents, but whether this translates into the elderly in India continuing to live with their children in old age over the coming years at the same level remains to be seen. In 2014, 37 percent of Indian workers were confident that they would achieve a comfortable retirement. This has risen by over half to stand at 57 percent in Women (59 percent), those aged (65 percent), those with two children (64 percent, dropping to 48 percent amongst those with no children) and those with high personal incomes (76 percent) are among those demographic groups that are most confident about reaching a comfortable retirement. ⁵ Help Age International, Global AgeWatch Index Accessed 17 August 2017 ⁶ World Economic Forum, We ll Live to 100 How Can We Afford It? May Accessed 17 August 2017 ⁷ United Nations Department of Economic and Social Affairs, World Population Prospects: The 2017 Revision, Key Findings and Advance Tables, June Accessed 17 August 2017 ⁸ ibid ⁹ United Nations Population Fund, Caring for Our Elders: Early Responses, India Ageing Report 2017, June Accessed 17 August Help Age India, State of Elderly in India 2014, Accessed 17 August The Aegon Retirement Readiness Survey 2017

9 The retirement aspirations of Indians Retirement is seen as a period of leisure and a time set aside for enjoyment. More than half of Indians (54 percent) report that traveling is an aspiration they hold for their retirement, 45 percent will use their time to pursue new hobbies, and two-in-five (39 percent) plan to use their time to do volunteer work. Spending time with friends and family remains a key aspiration for 58 percent of Indians, and this amount rises higher still when considering those already semi or fully retired (63 percent) possibly attributable to moving in with children and their family in older age. Almost half (46 percent) of Indians cite some form of business or paid work as a retirement aspiration, far surpassing the 26 percent of respondents globally. With this an aspiration for 41 percent of Indian women compared to 51 percent of men, these aspirations are routed in the reality of retirement in India. In the 2011 Census, it was found that 66 percent of men and 28 percent of women in rural areas, and 46 percent of men and 11 percent of women in urban areas, are working at age 60 or above. 11 Chart 3: Retirement aspirations among Indians Spending more time with friends and family 58% Traveling 54% Pursuing new hobbies 45% Volunteer work 39% Starting a business 31% Continue working in the same field Continue working, but in another field Studying 20% 20% 24% Living abroad 18% Don't know 1% None of the above 1% NET: Business/paid work 46% 11 Government of India, Ministry of Statistics and Programme Implementation, Elderly in India Profile and Programmes 2016, February Accessed 18 August The Aegon Retirement Readiness Survey

10 Part 2: Financial security In order to make their retirement aspirations a reality, workers need to accumulate sufficient wealth during their working lives. Typically, this wealth is accumulated through three broad sources: (1) the government (through Social Security and other government benefits), (2) employers (and previous employers) through workplace retirement plans such as the NPR, and (3) workers own savings and investments. However, the sustainability of retirement systems around the world, including India, is increasingly coming under question. The increased focus on long-term care in retirement adds a further dimension, placing increased strain on retirement funds. This means not only generating a retirement income but also having plans in place to deal with age-related healthcare and long-term care are necessary. Faced with these sustainability challenges, Indians have considerably different expectations to the global average as to how their retirement will be funded, much aligned to the complicated infrastructure of pension systems in the country. Indians expect the greatest portion of their retirement income to be funded by their own savings and investments (43 percent), surpassing the amount expected globally (30 percent). Only 27 percent is expected to come from the government, compared to 46 percent globally, outing India s first pillar pension as relatively weak. Comparatively, 30 percent of expected retirement income is expected to come from employers, higher than the 24 percent globally. Chart 4: Proportion of expected retirement income by three broad sources Global India 46% 24% 30% 27% 30% 43% Your own savings & Investments Your employer/previous employers (through workplace retirement plans) The government (through Social Security & other government benefits) It is important for workers to develop good saving habits at an early age. The survey identified triggers that get people started on the savings journey which can broadly be broken down into two categories. First, a gentle nudge from employers can provide enough momentum for workers to take that first step towards habitual saving. Second, a change in life stage can provide the catalyst. For Indians, the survey found that employment-related triggers were slightly more powerful than life stage related triggers. Almost three-fifths (59 percent) of Indian workers already saving for or intending to save for retirement were prompted by their employer (this compares with 41 percent globally). Employers starting to pay into a retirement plan acted as the key employer prompt for 27 percent of Indians, compared to 17 percent globally. On the other hand, life stages prompted 57 percent of Indians to start saving, again a bigger group than recorded globally (47 percent). For Indians, the importance of starting a family on beginning saving is striking. Three-in-ten (30 percent) of Indians were prompted into saving because of this, against just a sixth (16 percent) globally. Whether the prompt comes from the world of work or within the home, the important thing is starting the act of saving itself as a habit-forming activity to help build the most plentiful retirement savings possible. 10 The Aegon Retirement Readiness Survey 2017

11 Chart 5: What prompted retirement saving among savers and intenders NET: Employment reasons Employer started paying into a retirement plan for me Automatically enrolled into employer's retirement plan 17% 15% 23% 27% 41% 59% Employer offered matching contribution retirement plan 12% 21% I started my first job 11% 18% I started a new (not first) job 9% 11% Global India NET: Life stage reasons I turned a certain age I started a family Bought first home 13% 9% 10% I got married I got separated or divorced 5% 5% 16% 20% 31% 30% 30% 47% 57% Whether it is into a personal savings product or contributing to an employer-led retirement plan, the best way for workers to achieve a secure retirement is to make sure that they are always saving for retirement and be habitual savers. Almost three-in-five (59 percent) of Indian workers in the survey are habitual savers, surpassing the global average of 39 percent considerably. Those aged (65 percent), those married/in a civil partnership (64 percent) and those with a high personal income (63 percent) are among the most likely to be saving habitually for their retirement. A quarter of Indian workers (25 percent) save for retirement on an occasional basis. This leaves just a sixth (16 percent) that are not saving at all, which is substantially lower than the 37 percent globally but still too high. In India, just two percent are non-savers that never intend to save, seven percent have saved in the past and another seven percent aspire to save and thus could potentially be converted into savers in the future. Chart 6: Approach to saving for retirement HABITUAL SAVERS - I always make sure that I am saving for retirement 39% 24% 12% 19% 6% Global 59% 25% 7% 7% 2% India OCCASSIONAL SAVERS - I only save for retirement occassionally from time to time PAST SAVERS - I am not saving for retirement now, although I have in the past ASPIRING SAVERS - I am not saving for retirement though I do intend to NON-SAVERS - I have never saved for retirement and don t intend to The Aegon Retirement Readiness Survey

12 Those who do make saving a habit are far more likely to enjoy a brighter retirement outlook than those who do not. Nine-in-ten (90 percent) of Indian habitual savers are aware of the need to plan financially for their retirement; this compares to 83 percent of those who save on an occasional basis, 74 percent of those who have saved in the past and 61 percent of those who are aspiring to save. Almost two-fifths (39 percent) of Indian habitual savers are strategists those identified in the survey as having committed their retirement strategy to paper. In comparison, only 20 percent of occasional and a mere 11 percent of aspiring savers have a written plan. Four-in-five (81 percent) habitual savers in India have a good idea of the total value of their personal savings for retirement, compared to 61 percent of those who only save on an occasional basis, and half of those who no longer save (51 percent). Having a closer more regular link to their savings means that they are more likely to know the total value held. Two-thirds (66 percent) of habitual savers are confident that they will achieve a comfortable retirement dropping to 44 percent among occasional savers and 36 percent of aspiring savers. Chart 7: Habitual savers in the spotlight Habitual savers Occasional savers Past savers Aspiring savers Nonsavers Very/somewhat aware of the need to plan financially for retirement 90% 83% 74% 61% * Strategists - Have a written plan for retirement 39% 20% 20% 11% * Strongly/somewhat agree that they have a very good idea of the total value of all personal savings for retirement Extremely/very confident they will have a comfortable retirement 81% 61% 51% N/A N/A 66% 44% 49% 36% * * Very low base size Almost nine-in-ten (87 percent) Indian workers surveyed have a retirement strategy, far surpassing the global average (58 percent). Thirty-one percent can be defined as strategists they have a written strategy for retirement, more than twice the amount globally (14 percent). Preparing a written strategy for retirement can be a demanding process, requiring time, thought and consideration. Future retirees should consider what they want for their future, how much it will cost, how they will pay for it and most importantly, track their progress against their aims. Saving for retirement is a marathon rather than a sprint and it requires commitment and a sustained level of engagement. Those aged (41 percent), those with dependent children (35 percent), those working in the public sector (45 percent) and those with a high annual personal income (46 percent) are amongst the most likely groups to be strategists. In a reverse of a trend seen globally, more Indian women than men are strategists (34 percent vs 28 percent respectively). There are certain demographic groups who may benefit more from writing down a plan for retirement, yet are typically less likely to do so. In particular, 27 percent of those aged are strategists, when it is often seen that careful planning from an early age can help individuals be best placed to achieve retirement readiness. Furthermore, those with low personal incomes (26 percent), those who are single (26 percent) and those without dependent children (23 percent) are also less likely to be strategists, highlighting as seen above the importance of either improvements in jobs or starting a family can have on starting saving while potentially leaving behind those that do not. More could be done to help those more vulnerable to not achieving retirement readiness to formulate a plan in writing. 12 The Aegon Retirement Readiness Survey 2017

13 Chart 8: Indian workers having a retirement strategy 14% 44% 31% Written plan Unwritten plan No plan Don t know 56% 38% 4% Global 12% 1% India For India s sizeable cohort of strategists, the data shows that those who commit their retirement strategy to paper are better prepared for retirement across a range of measures. These include being aware of the need to plan financially for their retirement (94 percent), ahead of those with a non-written plan (83 percent), but far surpassing those with no plan at all (69 percent). Strategists are also more likely to have a very good idea about the value of their retirement savings (87 percent do so, against 70 percent with a non-written strategy and 40 percent of those without one). Strategists are more likely to say they always make sure they re saving for retirement (75 percent compared to 32 percent of those with no plan at all). They are also more confident in achieving a comfortable retirement (78 percent), more than twice as confident as those with no retirement plan (32 percent). Once again, India s strategists appear to have a rosier outlook for retirement than this cohort globally comparatively 53 percent of strategists globally are confident they will have a comfortable retirement. Chart 9: Strategists in the spotlight Strategists - Have a written plan Have a nonwritten plan Have no retirement plan Very/somewhat aware of the need to plan financially for retirement 94% 83% 69% Habitual savers I always make sure that I am saving for retirement Strongly/somewhat agree that they have a very good idea of the total value of all personal savings for retirement Extremely/very confident they will have a comfortable retirement 75% 57% 32% 87% 70% 40% 78% 51% 32% The Aegon Retirement Readiness Survey

14 Workers may have a retirement plan in place which aligns with their current financial and personal situations, but what about unforeseen circumstances, such as health issues or job loss? The survey found that over two-thirds (68 percent) of Indian workers have a backup plan to provide them with an income should they become unable to continue working before they reach their retirement age. Once again, this stands far above the portion of savers with a backup plan globally (33 percent). Yet, often these plans might prove to be insufficient protection for Indian workers should they be needed. The most commonly-cited backup plan is relying on savings (69 percent) which in particular in India, where personal savings are expected to form the bulk of retirement income, may have negative repercussions in later life should this safety net be quickly depleted. Over a third (37 percent) say they would rely on their partner, yet this strategy may prove inadequate if the household is reliant on a double income. Notably, products specifically formulated to address the issue of forced early withdrawal from the workplace actually feature towards the top of most popular backup plan options. Two-fifths (40 percent) of those with a backup plan would rely on income protection, while only half the amount globally (19 percent) cited using this. Three-in-ten (29 percent) of Indians with backup plans have critical illness insurance in their roster of options, slightly higher than the 21 percent globall Chart 10: Two-thirds of all Indian workers have a backup plan Don t know 4% Yes No 28% 68% Chart 11: Their backup plans include Income protection My spouse/partner working Critical illness insurance Loans from bank, etc. Inheritence Mortgage payment insurance Downsizing my home/selling a second home Gifts/loans from family members/friends Disability insurance from employer/i purchased My savings 69% 40% 37% 29% 21% 21% 18% 16% 16% 14% 14 The Aegon Retirement Readiness Survey 2017

15 Part 3: Healthy aging The ability of Indian workers to achieve their retirement aspirations goes further than simply accumulating sufficient retirement savings. Health also has an important influence on retirement planning and on retirement itself. The report later illustrates that the ability to sustain health throughout not only people s lengthening working lives, but also their lengthening retirement lives is set to become one of the biggest issues relating to retirement of our times. The majority of people in India self-report their health as either good or excellent (82 percent), far above the 68 percent globally. Almost a quarter of Indians (24 percent) report their health as excellent, whilst a further 57 percent self-report their health as good. At the other end of the scale, the majority of the remaining 18 percent say that their health is fair (17 percent) and just one percent say it is poor. Although excellent health peaks among those aged (30 percent reporting so), general health deteriorates as age takes a toll on the body. The amount of Indians in excellent health falls to 22 percent of those aged 55-64, and just 15 percent among those aged 65 or above. Chart 12: Overall health status 16% 15% 24% 26% 20% 22% 27% 30% Excellent Good Fair 51% 57% 53% 53% 58% 63% 59% 62% Poor 29% 17% 18% 16% 15% 16% 18% 21% 3% 1% 2% 1% 1% 2% Global Total India Total My health in older age is of some concern to 83 percent of Indians, in line with the global average (82 percent). Just shy of three-infive (59 percent) Indians say that it is their primary concern (i.e., it is something they are consider regularly and are actively working toward prolonging). Meanwhile, almost a quarter (24 percent) say their health in older age is a minor concern (i.e., they sometimes consider it but would prioritize other things like having enough income to live on when they retire). A further 17 percent just assume their health will be ok when they retire or haven t given it any thought at all. The Aegon Retirement Readiness Survey

16 Chart 13: Concerns about health Global India 6% 4% 12% 13% 39% 43% 24% 59% My primary concern - My health in older age is something I consider regularly and am actively working toward prolonging A minor concern - My health in older age is something I sometimes consider but I would prioritize other things, like having enough income to live on when I retire I take it for granted - I just assume that my health will be ok when I retire. It s not something I need to worry about Back of my mind - I haven't really given it any thought Indians are more likely to recognize that their current behavior and choices will have a direct impact on their health in older age than the global average (66 percent compared to 52 percent globally). Over seven-in-ten Indians feel optimistic about maintaining their health in retirement (73 percent), again outnumbering the global average (56 percent). More Indians currently in excellent health however are optimistic about this (82 percent) than the national average, and are more likely to acknowledge the link between their choices today and the direct impact these will have on their health in older age (76 percent). So, people s health expectations in India appear to be at least in part shaped by their differing starting points. Chart 14: The link between current health and health in older age Global Total India Total Currently in fair health Currently in excellent health My primary concern My health in older age is something I consider regularly and am actively working toward prolonging 43% 59% 59% 60% My behavior and choices today will have a direct impact on my health in older age 52% 66% 64% 76% Optimistic about maintaining good health in retirement - % optimistic 56% 73% 60% 82% 16 The Aegon Retirement Readiness Survey 2017

17 So, if good health is an integral contributing factor to enjoying retirement, what are Indians doing to keep themselves healthy? Indians are more likely to take all kinds of steps to keep themselves healthy than the global average, and markedly so in the case of looking after mental health. In terms of the day-to-day activities for maintaining good health, 73 percent of Indians are eating healthily (compared to 57 percent globally) and 64 percent exercise regularly (50 percent globally). This gap is equally pronounced between Indians and others globally when it comes to consider their long-term health when making lifestyle choices, such as avoiding stress (56 percent compared to 43 percent globally). However, the number of Indians who practice mindfulness regularly (41 percent) is more than double the amount who do so globally (17 percent globally), perhaps owed to mindfulness stemming from the spiritual practices routed in India. By comparison, the difference of amount of Indians having routine medical check-ups and self health-checks (48 percent) is far less pronounced than those globally (42 percent), with variation relatively muted in this regard between those in excellent health (52 percent) or those who believe their current lifestyle choices will have a direct impact on their health in old age (52 percent). For Indians that consider health in old age to be a primary concern, these activities are practiced slightly more widely, even considering how many more Indians engage in these activities than others globally. Four-fifths (81 percent) eat healthily, 46 percent practice mindfulness, and almost three-in-five (57 percent) take their health seriously and have routine medical check-ups. All of which means that Indian workers are making good efforts to look after themselves and their bodies now in preparation for retirement. Chart 15: Health and related behaviors I eat healthily (e.g., five-a-day portions of fruit and vegetables) Global Total India Total Currently in excellent health Health in old age is my primary concern Current lifestyle choices will have a direct impact on my health in old age 57% 73% 82% 81% 81% I exercise regularly 50% 64% 74% 68% 69% I avoid harmful behaviors (e.g., drinking too much alcohol or smoking tobacco) I think about my long-term health when making lifestyle choices. For example, I try to avoid stress I practice mindfulness regularly (e.g., meditation and relaxation exercises) I take my health seriously (e.g., have routine medical check-ups and do regular self-checks) 57% 66% 58% 68% 70% 43% 56% 55% 58% 58% 17% 41% 45% 46% 44% 42% 48% 52% 57% 52% The Aegon Retirement Readiness Survey

18 Part 4: Making the link between health and retirement preparations Health has an important bearing on the individual s ability to earn. The median average annual personal income for Indians in excellent health is 6,97,000 compared to 5,45,348 for those in good health and 4,44,750 for those in fair health. While Indians of all health levels are aware of the need to plan financially for retirement, clear distinctions arise in terms of how they act on this awareness and what actions they are able to put in place as a result. Indian workers in excellent health are far more likely to be strategists (49 percent compared to 26 percent of those in good health and just 20 percent of those in fair health). Almost three-quarters (74 percent) of Indian workers in excellent health are habitual savers, higher than among those in good health (57 percent) and fair health (47 percent). The result is that those in excellent health are more likely to have a very good idea of the value of their personal savings for retirement (82 percent agree they have a good idea, compared to 72 percent of those in good health and 60 percent of those in fair health). Ultimately those in excellent health are much more confident that they will be able to achieve a comfortable retirement (84 percent of those in excellent health, 51 percent of those in good health, and just 34 percent of those in fair health). Chart 16: Current health and retirement planning Currently in excellent health Currently in good health Currently in fair health Very/somewhat aware of need to plan financially 93% 85% 69% Strategists Have a written plan for retirement 49% 26% 20% Habitual savers - I always make sure that I am saving for retirement Strongly/somewhat agree that they have a very good idea of the total value of all personal savings for retirement Extremely/very confident they will have a comfortable retirement 74% 57% 47% 82% 72% 60% 84% 51% 34% NOTE: Poor health not included in chart as base size is very low As a result, there is a strong relationship between retirement readiness as measured by the ARRI and current health status. Indians in excellent health achieve a high ARRI score of 8.5, those in good health achieve a medium ARRI score of 7.4, while those in fair health achieve a medium -but lower- score of 6.6. Chart 17: Current health and retirement readiness Fair Good Excellent ARRI score NOTE: Poor health not included in chart as base size is very low 18 The Aegon Retirement Readiness Survey 2017

19 Part 5: Successful retirement Healthy aging and financial security Just one-in-five Indian workers (22 percent) expect to stop working immediately upon reaching retirement age. Comparatively, 35 percent expect to change the way they work by working part-time or taking on temporary contracts before eventually giving up work altogether. A further fifth (21 percent) expect to change the way they work but to continue working in some reduced capacity throughout retirement. While three percent are not sure yet of how they plan to transition into retirement, a considerably substantial 19 percent of Indian workers envision to continue working as they currently do. Chart 18: Working into retirement will become the norm for Indians Other / Don t know I will keep working as I currently do. Retirement age won t make a difference to the way I work 3% 19% 22% I will immediately stop working altogether and enter full retirement I will change the way I work (e.g., working part-time or on temporary contracts) and I will continue paid work throughout retirement in some capacity 21% 35% I will change the way I work (e.g., working part-time or on temporary contracts) but only for a while before I eventually give up paid work altogether Three-quarters of Indian workers expect to continue working in some capacity in retirement and as such expect increased choice, flexibility and control over how they will transition into retirement, highlighting that the way that Indians view retirement is changing. As mentioned in part 1, the perception and place for the elderly has shifted as traditional family support structures are destabilizing, and for those less well off in particular, working through retirement has become the only feasible way to fund these years. 12 Despite this, Indians generally want to achieve many things in their retirement, as evidenced by their long list of retirement aspirations (see chart 3 on page 9). Retirement is increasingly seen as a more active life stage, and the ability to maintain health long into retirement will be one of, if not the key factor in determining whether this is achievable. However, in looking at the experience of retirees, a sobering reality emerges. Almost a quarter (23 percent) of Indian retirees say that they retired earlier than they had planned, with family responsibilities (26 percent) and ill-health (22 percent) topping the listed reasons given for taking early retirement. The reality is that while many Indian workers may want to work beyond their normal retirement age, health and the provision of care for relatives, often the older parents of those appreciating retirement age themselves, may take the choice out of their hands. Furthermore, the economic landscape in India may not be cultivable of these desires: with the number of individuals at working age in India expected to reach 1.1 billion in , questions will hang over whether there will be jobs available for workers above retirement age with job growth stagnating in the country in recent years. The median age Indian workers expect to retire at is 60 years, in line with a recent proposal from the Indian government to increase the retirement age of private sector employees from 58 to A Bheemeshwar Reddy, Labour force participation of elderly in India: patterns and determinants, International Journal of Social Economics, Vol. 43 Issue: 5, Accessed 30 August United Nations Development Programme, Asia-Pacific Human Development Report Shaping the Future: How changing demographics can power human development, April Accessed 30 August 2017 The Aegon Retirement Readiness Survey

20 However, with the retirement age of government employees across states varying from 56-60, this could even be above the set retirement age for some. This number is steady across all employees, regardless of how they perceive their own health. That being said, those in fair or good health expect to spend a further 15 years living in retirement (as per the total median in India), while those in excellent health have considerably higher expectations with a median 20 years. Reviewing these findings, questions arise: How able will those in excellent health be to sustain a longer retirement period? And how tenable will retiring at 60 be for those in fair health? Workers with poor or fair health are in a more testing position in achieving retirement readiness. Health issues may cause obstacles to access the labor market and may also reduce the number of hours that they are able to work, which can have an impact on income and the ability to save. Those in poor and fair health may potentially find themselves in a more vulnerable position when making plans for retirement. Despite recognizing the need to work up until the statutory retirement age, by nature, those in poorer health may have no choice but to stop working earlier than planned. Chart 19: Median age expect to retire and number of years spent in retirement Total 75 years Total 75 years Total 80 years Median number of years expect to live in retirement Median age expect to retire Currently in fair health Currently in good health Currently in excellent health NOTE: Poor health not included in chart as base size is very low" 20 The Aegon Retirement Readiness Survey 2017

21 Part 6: The important role of employers Occupational benefits can play a significant role in addressing the link between retirement planning and health. Sixty-one percent of Indian workers say their employer offers them a retirement plan with employer contributions an amount that falls below the amount of Indians who report other benefits. The far more common occupational benefits in India take the form of medical health insurance, as reported by 73 percent of Indian workers surveyed, and a growing trend of wellness programs. Although this may not directly aid funding retirement, employers are already making a difference in helping workers to become retirement ready vicariously when considering the shift in retirement outlook and preparedness covered in part 5 that comes from looking after one s health. Chart 20: Workplace benefits offered to Indian workers Basic salary 85% Medical health insurance 73% Convenient location of workplace 70% Opportunities for career progression 68% Vacation/ paid time off 66% Access to good training provision 66% Overtime and bonus pay 61% Flexible working hours 61% Life insurance 61% Retirement plan with employer contributions 61% Ability to work past the normal retirement age 55% Retirement plan without employer contributions 48% Stock purchase plan 39% With a greater focus on health and well-being, employers can potentially take other steps to help keep their workforce economically active for longer. The offer of workplace health and wellness programs draw the support of virtually all (98 percent) Indian workers. And there are small steps that employers can take to help improve the well-being of their workers. Short-term, more day-to-day benefits, such as providing health food or snack options at the office (54 percent), access to exercise programs (49 percent) are the most sought after, and perhaps present employers with cost effective easy-win options to consider. As can be seen in the following chart, workers that cite health in their old age as a primary concern are slightly more likely to be interested in almost all employer health-related perks compared to all workers. The Aegon Retirement Readiness Survey