“At 50,” said author George Orwell, “everyone has the face he
deserves”. The aging face tells a tale— and no story does it tell more
eloquently than the story of financial security. Worry lines are almost always
incumbent upon financial problems and no Mona Lisa smiles possible under brows
burdened by money worries. Thus, the retiree or the impending retiree shows his
preparedness for retirement in worry lines or smiles.
Amit
Chandra (not his real name) returned home from a dinner one Saturday about six months
back when he felt a sharp twinge in his stomach. A visit to the family doctor
the next day did not result in any relief to the persisting discomfort; it led,
instead to a referral to a specialist at one of Mumbai’s best known hospitals.
Just 48 hours after he was being toasted by friends at his retirement party,
Amit was arranging for funds for an emergency operation — to stop the bleeding
from an ulcer.
Sufficient
health insurance cover ensured that Amit could afford the best treatment. But
the worry is about the subsequent incidental expenses — among other things, the
expenses of the special diet now needed the cost of repeated visits to doctors,
and the higher electricity bills from the demands of the increased use of the
juicer, mixer, air-conditioning and geyser. His daughter and son-in-law are
anxiously re-organising Amit’s(small) investment portfolio, hoping to ensure
that Amit and his wife have enough to live on and pay for the ongoing medical
expenses. It’s becoming clear to them that they will have to help support the
older couple. The worry lines have begun to appear also on their faces,
extending from the faces of Amit and his wife, who, incidentally, suffers from
asthma.
Retirement
planning is rare in India, where financial dependence on children is high. Pension
plans set up by employers are considered sufficient — though, all too often,
these packages take a miserly view of inflation.
Amit
was with a university for most of the 32 years of his working career; his
monthly pension is around Rs30, 000, a meagre sum for living in Mumbai, and an
impossible sum for their health-related needs, care that no health insurance
plan will cover indefinitely.
Perhaps
late for Amit, his experience has been a lesson for his daughter and son-in-law
— benefit plans ordained as mass products by employers are just not enough. If
retirement needs are specific to the individual, then retirement plans must be
too.
There are various financial savings options to plan for ones
retirement. The Pension Fund Development and
Regulatory Authority, set up in 2003, regulates three broad types of pension
schemes — the government pension schemes (such as the one that covers Amit
Chandra), the National Old Age Pension Scheme for people living below the
poverty line, and the private pension schemes / funds.
Pension
plans from life insurers could be another lucrative option, which not only lets
you plan for retirement in a structured systematic and disciplined manner but
also provides protection against uncertainties. So much so that there are plans
today which even ensure a guaranteed financial support for your spouse’s
retirement even in your absence. These plans offer a wide range of options in
terms of various benefits and payment schemes. Subscribers can opt for a
payment plan based on their financial capacity, their projected needs after
retirement and on the basis of the age at which they plan to retire.
A
pension plan can be purchased on a one-time lump-sum payment (a better choice
for those close to the age of retirement) or deferred payment of regular annual
premiums over a period of time, which younger people can opt for more
comfortably. The benefit of income after retirement can be disbursed
immediately upon the subscriber’s retirement or, alternately, the subscriber
could choose to defer the payment wholly or in part till such a time as he or
she requires it; the monthly annuity would be calculated accordingly. Plans
also allow for life-time annuity payments or payment for a guaranteed period of
time. Some plans also offer the return of annuity amount to nominees, leaving behind a legacy
for them.
Today,
Amit and his wife are considering selling their two-bedroom apartment in Mumbai
and moving to a smaller, cheaper town — they are not sure where! They still
need a place where advanced medical care is available. This unhappy choice also
means that will not spend their golden years comfortably in the security of a
familiar neighbourhood, with an established support system run by long-known
people, among old friends and regular acquaintances.
For
Amit’s daughter, such an unhappy choice is no choice — she and her husband have
begun to plan their future on realistic projections of pension needs and various
eventualities, working inflation into their calculations. She’s working on her
Mona Lisa smile!
By-
Ms. Anisha
Motwani,
Director &
Chief Marketing Officer
