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HDFC Pension, one of India’s leading Pension Fund Managers, has been at the forefront in creating consumer awareness amongst Indians about retirement planning using the National Pension System (NPS).
Sriram Iyer, Chief Executive Officer, HDFC Pension
October 1st is marked as NPS Diwas. To coincide with the day, HDFC Pension has launched a first-of-its-kind NPS Preference Index that highlights the preference of NPS amongst different consumer groups.
The NPS is a government-backed retirement savings program designed to provide financial security to Indian citizens during their retirement years. NPS can be subscribed to by any Indian citizen, aged between 18-70 years, on a voluntarily basis.
HDFC Pension commissioned an independent market research specialist, Ipsos for conducting the survey for the NPS Preference Index. The findings are based on a consumer market research study* with 1,801 NPS aware consumers across Tier I/II/III locations in the age cohorts of 30-40 years and 45-55 years.
The objective of the survey was to understand consumer outlook towards retirement and gauge consumer familiarity, appeal and consideration, leading to the ‘NPS Preference Index’ which can be tracked over time.
The survey findings indicate that currently the NPS Preference Index stands at 54 (on a scale of 0 to 100). Hence, it can be concluded that NPS Preference Index is currently at a moderate level and is equally influenced by the three pillars of familiarity, appeal and consideration.
NPS Preference Index improves with increasing income level of the consumers. North region has the highest NPS preference index (57) compared to other regions.
Some other highlights of the report
Even though, on an average, 32 years is considered as an ideal age to start retirement planning, the retirement corpus need is often underestimated. Average ideal retirement corpus of Rs. ~1.3 Cr stated by consumers is observed to be less than 10X of their current annual household income reflecting the need to educate consumers about the recommended levels of retirement corpus
Capital security, tax benefits, and continued income after death are key factors for retirement products. While being a relatively new instrument, NPS ownership is at 24%, with appealing features like tax-free withdrawals, safety (being Government regulated) and benefit for spouse. Tax benefit (80C/80CCD) has a relatively higher appeal (35%) among those enrolled for NPS compared to all consumers (31%)
While tax benefits, peers, and financial advisors trigger NPS purchase, educating people about NPS and its features is critical to drive adoption. It has further been noticed that individuals who have enrolled for NPS feel more confident about their financial health during retirement years. It can thus be said that NPS ownership is a strong indicator of financial preparedness for one’s retirement years.
*Note: This consumer research study was conducted as Face-to-Face personal interviews between Aug-Sep 2023 across 12 cities in India among NCCS A, annual household income above INR 10 lakhs (above INR 7 lakhs for Tier III cities).
To know more about the survey, click here.
Speaking on the launch, Sriram Iyer, Chief Executive Officer, HDFC Pension said, “On the occasion of NPS Diwas, we are pleased to unveil the NPS Preference Index, a report that puts the industry-first spotlight on the National Pension System (NPS). In an age where financial security is paramount, our commitment to empowering individuals for a secure retirement gains unprecedented strength.
National Pension System (NPS) is instrumental to facilitate an income post retirement, making it pivotal for long-term financial security. In India, a significant opportunity exists to boost NPS adoption, which is why there was a need to delve deeper into the intricacies and understand why.
Our pursuit is not limited to mere awareness; it extends to building an earnest understanding of NPS among individuals, which is why we worked further ahead to present the NPS Preference Index’, a powerful metric derived from three broad aspects that delve into familiarity, appeal and consideration for NPS.”
HDFC Pension is the fastest growing legacy Pension Fund Manager in India, under Retail and Corporate NPS segments with the highest number of subscribers (16,92,504 as on September 1st 2023). HDFC Pension has crossed the milestone of Rs. 50,000 cr. of Assets Under Management (AUM) on May 15th 2023 and has been awarded as the Best Performing PFM by Money Today for 3 consecutive years from 2019 to 2022.
About HDFC Pension
HDFC Pension Management Company Limited is a licensed Pension Fund Manager appointed by Pension Fund Regulatory & Development Authority (PFRDA) to manage pension corpus of citizens enrolled under the National Pension System. HDFC Pension Management Company Ltd. is a wholly owned subsidiary of HDFC Life Insurance Company Ltd., one of Indias leading Life Insurance Company.
HDFC Pension is licensed as a Pension Fund Manager (PFM) and as a Point of Presence (POP), and is managed by seasoned professionals with vast experience in Insurance & Pension Administration, Risk Management, Banking, Capital Market and Asset Management. The Company is committed to delivering superior risk adjusted returns strictly adhering to the prudent investment norms and guidelines laid down by PFRDA. As a PoP, the Company aims to provide seamless service to Individuals (under the retail NPS scheme) and Corporate Employees (under the Corporate NPS scheme) by helping them subscribe to NPS and for their ongoing service needs through the life of their investment.