Retirement Literacy

Financial illiteracy is the single most important barrier to achieving mass-scale voluntary enrolments in contributory pension programs and disciplined retirement savings over multiple decades by informal sector workers with modest, intermittent incomes. Equally, financial advice and customer knowledge is the single most important raw material for effective retirement planning as pension benefits, especially in voluntary, defined contribution (DC) retirement programs based on individual accounts, largely depend on the financial behaviour and longevity expectations of individual subscribers.

Effective retirement planning using voluntary DC pension programs is however the most complex behavioural finance challenge as it often involves a multiple decade savings horizon while imposing important choices and responsibilities on individual subscribers on questions of market, longevity and inflation risks. Questions and choices governing product portfolios, savings frequency and adequacy, replacement rates or annuities (as against systematic withdrawals) will appear daunting to even high income urban audiences. They are even more challenging for low income workers in rural areas who form a major share of India's workforce.

A significant grassroot level effort is therefore needed to inform and encourage individuals to voluntarily defer a meaningful part of their present consumption towards retirement savings. This is a gigantic problem for India as informal sector workers are unable to easily relate to the concepts of "retirement" or "pensions" and are also not presently exposed to long-term savings products with market-linked returns.

With support from NABARD and KfW, IIMPS has developed a unique, field-tested financial literacy strategy and a Retirement Literacy Toolkit to inform and educate farmers, head-loaders, small shopkeepers, daily wage earners, street venders, rickshaw pullers and domestic workers about pensions, savings and insurance concepts and products.

 

 

Changing Lives
field updates

Low income individuals in remote tribal locations at Tamil Nadu are now being enrolled for "micro-pension" in partnership with Centre for Tribal Research and Development (CTRD).

IIMPS and eKutir will jointly assist low income farmers in Odisha to accumulate micro-savings through the Micro-Pension model.