It has been 15 years since the NPS was opened to general investors, but the study shows that 53% people still need help through the process and 44% do not even understand its benefits. The low ownership of the NPS and lack of understanding of the product could be rooted in the commission structure of the pension scheme. Financial advisers gain little from recommending it as the advisory fee is just 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 be dissuading advisers from making the effort to educate clients about the benefits of the NPS.
The IRIS 4.0 shows that most awareness of the NPS comes from TV or media advertisements (62%), followed by news or articles (39%), while retirement advisers do not figure anywhere.
One significant factor for the NPS’s limited appeal is its inflexibility. Withdrawals from the accumulated corpus are restricted till the subscriber turns 60, and 40% of the corpus has to be mandatorily used to purchase an annuity. However, this structure aligns with the core goal of retirement planning— disciplined long-term investing without early withdrawals. The mandatory annuitisation ensures a lifelong income stream, which is one of the primary reasons investors choose the NPS.
IRIS is a proprietary primary research undertaken yearly in collaboration with Kantar. It assesses the levels of preparedness among urban Indians to lead a secure retirement life across financial, emotional and health aspects. 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 towards better retirement strategies.
The Financial Preparedness Index measures the degree to which Indians feel financially secure and prepared for their retirement life. The Health Preparedness Index measures the degree to which Indians feel secure about their health and fitness for their retirement life. The Emotional Preparedness Index measures the degree to which Indians feel secure about the support from family and society for emotional, social and financial needs for their retirement life. All these are assessed and scored on a scale of 0 to 100.
The study was conducted among 2,077 respondents in the 25-65-year age group, across 28 cities. This year, it included new cohorts like double income, no kids (DINKs) and gig workers. DINKs align closely with the overall Indian population, with an index score of 49, indicating strong health and financial preparedness. In contrast, gig workers scored only 46 points, reflecting lower readiness across the cohort.
Awareness is high, but ownership is low
Note:The NPS was opened to general investors in 2009. While awareness about the scheme has risen, it has not translated to investment.
What is your perception of the NPS?
Note:Almost everybody perceives the NPS as a trusted and safe product, which can make it the preferred choice for long-term retirement planning.
What made you invest in the NPS?
Note:The ultra-low cost of the NPS is a major attraction for many investors. The certainty of life-long income from annuity is the second most important motivator for investing in the scheme.
PRASHANT TRIPATHY,CEO & MD,MAX LIFE INSURANCE
Note:“The 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 the NPS?
Note:Most investors stay away because they feel the scheme is very complex. This perception remains even after 15 years of being open to the general public. The compulsory annuitisation is a pain point for only 23%.
How satisfied are you with the NPS?
Note:While 63% of users are satisfied with the NPS, servicing and communication issues are big reasons for dissatisfaction.
Figures don’t add up to 100% due to multiple responses. Source: IRIS 4.0