With no retirement plans, NRIs expect kids to look after them

UAE based Indians have critical gaps in their financial and retirement planning, leaving them at the mercy of their children during their old age.

According to a new survey carried out by Standard Life NRI (Non Resident Indian), majority (75 per cent) expect their children to look after them during retirement as they mainly focus on relatively illiquid investments like gold and property.

The survey reveals that only 10 per cent of them invest in any retirement plans. The study highlights that risk aversion and lack of professional advice leads to critical gaps in financial and retirement planning amongst UAE based Non Resident Indians (NRIs).

Having been a part of the so-called sandwich generation (people who have to take care of the children as well as ageing parents), many NRIs believe that the same would hold true when they reach the retirement age.

One of the most striking findings was that ‘family expectations’ played a huge role in retirement planning. It also revealed that 26 per cent will return to India after retirement, while 24 per cent will retire in a third country, and 22 per cent will continue working after retirement but in a third country.

However, the prudent ones will always save for the future. “I believe in saving for my old age. Why depend on somebody else when you can do it with a bit of planning and foresight,” said Devan Patel, an IT manager.

Expat Indians and even those who work in the private sector in India need to take retirement planning seriously. They are not entitled to any pension from the Government of India to fund their future expenses when there is no take home salary to pay the bills.  

Off late, the government has been encouraging Indians to invest in pension based funds. For example, the authorities are promoting the National Pension System (NPS) to encourage the workforce to save for old age.

NPS, in short, is India's answer to the US' retirement scheme- 401(K) - a government-approved pension scheme for Indian citizens in the 18-60 age group. While central and state government employees have to subscribe mandatorily, it's optional for others. Many banks are now promoting the scheme and have a bigger customer base than before.

As per Standard Life’s report many (63 per cent) of the respondents feel positive about the Indian government’s National Pension Scheme (NPS) but most may not have actually subscribed to it. While 25 per cent are of the opinion that that NPS will not provide sufficient income for their retirement years, and 13 per cent did not have any response to the NPS.

“There is no dearth of saving instruments but you need to be aware of,” as Patel puts it.

The report further revealed that 90 per cent of respondents invested in long term investments in the past. However, most of the investment preferences were towards relatively illiquid assets like gold/diamonds (77 per cent) and property (55 per cent). While less interest was seen towards asset classes like mutual funds (19 per cent) and equities (15 per cent).

Standard Life’s report studied the saving, spending and investment behaviour along with general aspirations of nearly 300 NRIs across the UAE.

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