It's been 15 years since the NPS was opened to normal investors, but the study shows that 53% of people still need help during the process and 44% don't even understand its benefits. Low NPS ownership and lack of understanding of the product could be due to the pension scheme's fee structure. Financial advisors earn little by recommending it, as the advisory fees are only 0.02% of the corpus value per year, with a minimum of Rs 100 and a maximum of Rs 1,000. This low compensation could discourage advisors from making the effort to educate clients about the benefits of NPS.
IRIS 4.0 shows that the greatest awareness of NPS comes from television or media advertisements (62%), followed by news or articles (39%), while retirement advisors are nowhere to be found.
A major número in the limited appeal of the NPS is its inflexibility. Withdrawals from the accumulated corpus are restricted until the subscriber turns 60, and 40% of the corpus must necessarily be used to purchase an annuity. However, this structure aligns with the central goal of retirement planning: investing disciplinedly for the long term without early withdrawals. Mandatory annuitization guarantees a lifetime income stream, which is one of the main reasons why investors choose NPS.
Indian Retirement Rate Study
IRIS is proprietary primary research conducted annually in collaboration with Kantar. It assesses the preparedness levels among urban Indians to lead a financially, emotionally and health-secure retirement life. The study identifies gaps in planning and raising awareness about the need for early preparation for retirement. It also helps guide individuals, policymakers, and institutions toward better retirement strategies.
The Financial Readiness Index measures the extent to which Indians feel financially secure and prepared for their retirement life. The Health Preparedness Index measures the degree to which Indians feel confident about their health and fitness for retirement life. The Emotional Readiness Index measures the extent to which Indians feel secure in the support of family and society for the emotional, social and financial needs of their retirement life. All of them are evaluated and scored on a scale from 0 to 100.
The study was conducted among 2,077 respondents in the age group of 25 to 65 years, in 28 cities. This year, it included new cohorts such as dual income, childless (DINK) and self-employed. DINKs align closely with the overall Indian population, with an index score of 49, indicating strong financial and health readiness. On the contrary, self-employed workers obtained only 46 points, reflecting lower preparation in the entire group.
Awareness is high, but ownership is low
Note:The NPS was opened to normal investors in 2009. While awareness about the scheme has increased, it has not translated into investments.
What is your perception of NPS?
Note:Almost everyone perceives NPS as a safe and reliable product, which can make it the preferred option for long-term retirement planning.
What made you invest in NPS?
Note:The ultra-low cost of NPS is a big draw for many investors. The certainty of earning lifetime income from annuities is the second most important motivator for investing in the plan.
TRIPATHY PRASHANT, CEO & MD, MAX LIFE INSURANCE
Note:“NPS is a great investment option. “It’s a reliable way to save for retirement even if you don’t have a traditional job.”
What keeps you away from NPS?
Note:Most investors stay away because they consider the plan too complex. This perception remains even after 15 years of being open to the normal public. The mandatory annuity is a problem for only 23%.
How satisfied are you with the NPS?
Note:Although 63% of users are satisfied with the NPS, service and communication problems are major reasons for dissatisfaction.
The figures do not add up to 100% due to multiple responses. Fountain: IRIS 4.0