India heading towards a Big Retirement Pension Crisis

We all work hard throughout our lives hoping to enjoy a peaceful, secure, and dignified retirement. But for a growing number of Indians, that dream is slipping further out of reach. India is heading toward a massive pension crisis, and what’s worrying is that most people are either unaware or feel helpless in the face of it.

What’s Going Wrong?

Unlike many developed countries, India doesn’t have a strong social security system. While the older Old Pension Scheme (OPS) provided lifetime income with inflation-linked increases (Dearness Allowance), it was replaced with the New Pension Scheme (NPS), which is market-linked and uncertain.

Now there’s talk of a Unified Pension Scheme (UPS), but it still lacks the guarantees that OPS once offered. Moreover, UPS is only for government employees and not for all Indians. For the majority of the workforce — especially those in the private or unorganised sectors — there is no guaranteed pension at all.

At the same time, India is facing other economic pressures. The cost of living has gone up, and wages are not keeping up. Families that once supported their elderly are now fragmented into nuclear setups, often struggling to manage their own expenses. So, senior citizens are increasingly left on their own — with very little financial support.

Why Our Elders Didn’t Face This Before

Older generations had not to worry so much about pension and retirement because they had:

• Strong family support: Children took care of parents.
• Guaranteed government pensions.
• Inherited property that appreciated in value.
• Lower life expectancy, meaning smaller retirement savings were enough.

Earlier, people used to live in a joint family and it was quite easy to live life after retirement due to support from family. But now, people prefer to live in nuclear family and thus, a strong retirement plan is extremely necessary.

But today’s reality is different. The elderly population in India is growing rapidly. According to a UNFPA report, India had 153 million people aged 60+ in 2023, and this number is expected to reach 347 million by 2050 — about 21% of the population. Yet, most of them are not financially prepared for retirement.

India’s Retirement Numbers Are Alarming

India’s pension assets account for just 3.3% of the GDP. In comparison:

• Australia: 130%
• UK: 100%
• US: 150%

According to DSP Pension Fund, India’s retirement savings gap is growing at 10% per year and may hit a staggering $96 trillion by 2050.

In the Mercer CFA Global Pension Index 2024, India ranked 48th out of 48 countries, falling even further from 45th in 2023. The reasons? Low pension coverage, poor income post-retirement, and lack of regulation.

What Options Do Indians Have?

Here’s what’s currently available:

• Government employees: NPS/UPS (replacing OPS)
• Private sector: NPS + EPF
• Unorganised sector: NPS + PPF (if they opt in at all)

But the benefits are limited and unreliable, especially for those not in government jobs.

Misleading Pension Products

What makes matters worse is that many pension products offered by banks and financial institutions are confusing or misleading. Some club life insurance with pension payouts but offer returns lower than regular fixed deposits.

Take this example: A scheme promises ₹30,000 per month pension after investing ₹10 lakh per year for 5 years. Sounds attractive, right? But simple maths shows that an FD at 7% interest would give you more than ₹35,000 per month — without all the fine print and insurance conditions.

Unfortunately, there’s no regulatory crackdown on such dubious schemes, and many seniors end up locking their hard-earned money into these plans.

India vs. Developed Nations

Let’s compare this with other countries. In nations like the UK, US, and Australia, pension schemes are well-regulated, inflation-linked, and most citizens have some form of state-supported retirement income. The government contributes regularly, and retirees don’t have to rely on market ups and downs for their survival.

In contrast, India’s NPS and UPS are tied to the stock market. Ironically, while common financial wisdom says retirees should avoid risky investments, Indian pensioners are being forced into market-linked plans.

Worse still, institutions like LIC, which manage pension funds, are allowed to invest in risky corporate bonds, raising even more questions about the safety of retirees’ money.

Where Do We Go From Here?

This situation is not just about money — it’s about dignity and justice for those who spent their lives building this country. If lawmakers and corporates continue to benefit from lifelong pensions and perks, it’s only fair that the average Indian worker also gets a secure, inflation-linked, and transparent retirement system.

We need urgent reforms:

• Universal minimum pension for all.
• Better regulation of pension products.
• Financial literacy around retirement planning.
• Government co-contribution schemes for the unorganised sector.

Let’s not wait until millions of elderly Indians are forced to choose between food and medicine.