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However, there are clear risks in translating these savings into a comfortable standard of living in retirement, as they are often kept in illiquid and short-term instruments that may not provide a long-term hedge to inflation.
Towers Watson’s Savings Attitudes Survey (India and China) finds that approximately 90% of workers in China and 80% of workers in India expect to retire at the age 60 or younger with only moderate reductions in their spending power, thereafter.
In terms of average annual savings as a%age of income, the study shows a high ration of 35% for China and 24% for India, indicating a strong savings culture in both countries. The most popular means to invest in India is through the purchase of gold or silver, with a further 41% purchasing jewellery to save. In China, the most popular investment vehicles are bank deposits, mutual funds or pension plans, insurance products and equity investments.
Despite the prevalent savings culture, there may be hidden risks for retirees, particularly in an environment where economic growth and wage inflation are high. For instance, the real value of savings are eroded by the use of inefficient savings vehicles.
Also, much accumulated capital is diverted to necessities other than retirement, such as housing or children’s needs. Changing family structures away from the traditional extended family compounds the problem. Nearly 75% respondents in China and India agree or strongly agree that “it will become much harder for children to support their parents in the future”.
These findings bring to the fore the collective responsibility shared by government policy, employer benefit strategy and individual investments. In India, the proportion of workers who are beneficiaries of a formal retirement savings plan, via either the state or an employer, remains relatively low.
Anuradha Sriram, Benefits Director, Towers Watson India said, "Secure retirement benefits, whether mandatory or voluntary, are critical for an employee's future. With benefit costs ever increasing, employers need to facilitate retirement savings and raise awareness among employees by going beyond mere provision. Avenues such as the National Pension System (NPS) will definitely attract employer attention as a sustainable retirement investment vehicle for employees going forward. In a competitive growth environment, companies are looking at innovative ways to manage talent; enabling and supporting employees towards their retirement saving needs is a critical step in that direction”.
Other key findings from the survey include, in India, across age groups, ’rising living cost’ emerges as the single largest risk factor to live comfortably on retirement. Housing and children’s expenses (wedding/education) are the top two motivating factors for Indians above 35 to save. Strong correlation between health status and financial decisions in India as opposed to China - those in better health save significantly more.
The Towers Watson Savings Attitudes Survey contains data on how and why people save, and how adequate these savings are likely to be in funding their likely income needs in retirement. The survey sampled individuals working for large firms (those employing at least 1,000 people) in urban areas of China and India.
The resulting sample includes 2,261 employees in China and 2,440 employees in India. The average age of respondents is approximately 33 in both countries with around 65% of Chinese respondents and 72% of Indian respondents being male.
Use of savings vehicles
| China | India | |
| Bank Deposits | 82.9% | 32.2% |
| Mutual Funds or Pension Plans | 66.6% | 51.6% |
| Insurance Savings | 57.4% | 58.4% |
| Equity Investments | 51.5% | 36.7% |
| Gold or Silver | 25.2% | 64.0% |
| Property | 27.8% | 28.7% |
| Jewellery | 11.7% | 41.1% |
| Family Businesses | 10.0% | 30.9% |
