1646126704_e6XQ8N_b_srinivas.jpg 
Srinivas Balasubramanian, Head of Products, ICICI Prudential Life Insurance Company says retirement planning should begin at the earliest in order to live 'happily' post retirement. He talks to ASHISH SINHA of BW Businessworld on how to go about planning for retirement, steps required and the detailing required before deciding on a suitable product. Excerpts:
Photo Credit :
Why is it important to plan for golden innings/retirement?
Indians today expect to live 6-7 years longer than they did a couple of decades back, thanks to advancements in healthcare facilities. While our increased lifespan certainly calls for a celebration, it is equally vital to ensure the quality of life. According to a series of studies conducted by the World Economic Forum, on an average, retirees are set to outlive their retirement savings by 8-20 years1. Therefore, it becomes essential to start retirement planning as early as possible. Some of the biggest worries for retiring individuals are irregularity of income, how to beat inflation, rising medical expenses etc. Additionally, some people might want to retire earlier than the expected retirement age while some may have dreams and aspiration, which they might want to fulfil once they retire. Nuclearisation of families, children migrating overseas for job opportunities etc. have made financial independence an indispensable part of retirement life.
All these make it essential for individuals and families to have a dependable financial plan in place to ensure a stress-free life post retirement.
What are the steps one should consider while planning for retirement?
Financial planning for retirement often revolves around three steps: Understanding how much will I need in the future; Ascertaining my current savings and how much it will grow till my retirement and determining how to bridge the gap, if any?
My needs: It all begins by looking at my current expenses and then trying to estimate by how much it will grow factoring in inflation. The second step involves a bit of speculation and crystal gazing to identify how much of that expense will stay on with me after I retire depending upon the post-retirement lifestyle and aspirations, which I have visualised for myself. This part might prove to be difficult for those who are still a good number of years away from retirement. It is always advisable to keep a certain buffer above the projected expenses to shield oneself from life’s unexpected surprises.
How much will I have? Once I have understood approximately how much I might need after my retirement, it is time to take a stock check of all my savings. During the process, one should not include anything that is dedicated exclusively to a different goal such as child’s education, buying a home etc. since our prime focus is retirement. Assuming that my total savings earmarked for retirement grows at an assumed rate of interest, up to my chosen retirement age, the final amount becomes my retirement fund.
Is it enough? The third and the most crucial step is to determine whether my retirement fund is robust enough to generate an income that is greater than my projected expenses. The reason being, while my expenses will rise due to inflation, my retirement fund will stay the same.
In case the answer to the third question is 'no', it is strongly advisable to start planning for retirement as soon as possible. Additionally, it is advisable to revisit our retirement planning, preferably once a year, to accommodate any changes in our retirement goals.
What are the different types of retirement planning tools?
We have already discussed the key steps for retirement planning in the previous question. A simple internet search will also throw up a plethora of tools and calculators to help everyone asses how much they need to save depending on their retirement goals. These tools, while ranging from being simple to extremely sophisticated are loosely based around the three steps already discussed. While using a tool is often convenient, it is not something one cannot do themselves using an excel sheet or a pen and paper using those steps. The best way to use a retirement tool is to do the calculation yourself and use the tool to check the validity of the same.
What are the benefits of investing in annuity/retirement plans?
Some of the primary requirements of retiring individuals are access to regular income, which is guaranteed for whole life and that such an income should be 'volatility proof'
An annuity product provides an income, which is fixed at inception and guaranteed for life. Even if the annuity rates were to go down in the future, you will continue to receive the same amount throughout your life. As the annuity product is not linked to the market, it is completely insulated from any volatility in the market. Irrespective of how the market performs, your income remains fixed and guaranteed.
Since you already know how much retirement income you require, and the retirement fund you already have, it becomes very easy to plan and save for the additional amount, if any, to ensure you have the perfect retirement that you envisioned.
What are you offering?
We offer a range of retirement products to help individuals lead a financially independent retired life. ICICI Pru Guaranteed Pension Plan, our flagship annuity product, provides customers the flexibility to choose between 'Immediate and Deferred' annuity. With ICICI Pru Guaranteed Pension Plan, customers on the cusp of retirement, wanting an option to receive immediate regular income, can opt for the immediate annuity variant by paying a one-time premium. Those whose retirement is still sometime away can opt for the 'deferred annuity' variant that provides the flexibility to receive income at a later point. For instance, customers who still have a few years left for retirement; have the option to defer the start of the income for a maximum period of 10 years. Some notable features are the early return of purchase price option and the return of the premium amount on diagnosis of specific critical illnesses and permanent disability.
How do you see the retirement product category growing post covid?
Covid-19 has had a significant impact on people's lives and has transformed the future of financial planning. With rising risk to our lives and livelihood, it has served as a wake-up call for people to start planning for their retirement, as this is when regular income stops coming in. The annuity segment is benefiting from rising awareness of retirement planning, and it is likely to continue in future years. At ICICI Prudential Life Insurance, the annuity segment has grown by 120 per cent in FY2021 to Rs 22.92 billion over FY2020 with a 3-year CAGR of 94.6 per cent.
How does retirement planning ensure increasing regular income?
Inflation is an uncontrollable factor that hampers retirement planning even for those with the best laid-out plans. While annuity products guarantee a fixed lifelong income, it is possible to combine multiple products or their options to ensure that the income amount increases at certain periodic intervals. This way, the impact of inflation can be minimised significantly during the golden phase of one’s life.
Our innovative retirement solution developed by combining two variants of our popular ‘ICICI Pru Guaranteed Pension Plan’. It provides customers with increasing regular lifelong income that doubles after five years and triples after the 11th year, thereby shielding them against the rising cost of living.