Indian employees heavily dependent on employers for post-retirement income

MUMBAI: Indian employees are heavily dependent on employers for post-retirement income as employer retirement plans form the top source of income for retirement for many, shows the Global Benefits Attitudes Survey by global professional services company Towers Watson.

Minimal social security benefits and inadequate awareness about suitable retirement savings vehicles have resulted in employees becoming over dependent on retirement plans provided by employers, the survey shows.

"...the breakdown of traditional support systems, increased longevity, rising inflation and rapid urbanization now require a large proportion of the current working population to build their own retirement corpus," Anuradha Sriram, Director – Benefits, Towers Watson, India said in a press release. The survey was undertaken across 12 countries, with participation from 22,347 employees working for large, non-government employers. Employees who are members of a retirement plan believe that their most important income sources during retirement are likely to be their employer retirement plan, followed by savings/investments and property.

The trend is accentuated amongst employees approaching retirement, with 78% (of those with a retirement plan) saying their retirement plan is the primary way they save for retirement, compared to 68% of those under forty.

The survey also signals that retirement benefits are emerging as an important retention driver. Only 12% of Indian employees who agree their retirement plan meets their needs plan to leave their organisation in the next two years compared with 39% of those who disagree the plan meets their needs.

The survey also shows that emerging economies like India and China enjoy a higher savings culture as compared with their western counterparts like US and UK. With a majority of Indian employees expecting to retire around 60, despite a high savings rate, a large number are not confident of affording a long spell of retirement.

The survey also shows that when given a choice between a better retirement provision and larger base pay, employees have begun opting for generous and guaranteed retirement benefit. However, when given an independent choice between the various components of rewards, Indian employees prefer a larger base pay hike across all age groups. This contradiction signals a visible need for employers to enhance retirement education and help employees understand the value of retirement benefits.