Too little, but is it too late? Indians pin retirement hopes on gratuity — but 99% say it won’t work

A staggering 99% of Indian employees believe that their gratuity payout will not be sufficient to meet retirement needs, according to a nationwide pension survey conducted by Grant Thornton Bharat. The report also revealed that a vast majority of working professionals contribute less than 15% of their salary towards retirement savings—signalling a widening gap between retirement expectations and actual financial preparedness.

The survey, conducted between August and September 2024, examined responses from individuals across income groups and sectors, with 79% of participants falling in the 25–54 age group and 88% employed in the private sector. Despite high aspirations for post-retirement income—over 55% expect a pension of ₹1 lakh or more per month—most respondents are saving too little to make those goals a reality.

According to the data, 74% of respondents contribute just 1% to 15% of their monthly income to retirement funds. Even among high-income earners—those with annual salaries above ₹40 lakh—58% restrict their contributions to this limited range. “There is a clear mismatch between the pension people expect and the contributions they’re making. Without higher savings or better planning, a secure retirement may remain out of reach,” the report noted.

The gratuity benefit, which is a lump sum paid by employers after at least five years of continuous service, is widely seen as inadequate. Nearly every respondent—99%—said their gratuity amount would fall short of supporting their retirement life. Compounding this concern, only 29% were well-informed about their gratuity entitlements before receiving them.

The report highlighted that the three most relied-upon retirement instruments remain the Employees' Provident Fund (EPF), National Pension System (NPS), and gratuity. However, dissatisfaction is growing: many participants expressed concerns over the adequacy of NPS returns, and 75% cited fears about the security of their retirement investments.

Grant Thornton’s findings underscore the urgent need for better financial literacy, higher contribution rates, and greater awareness around pension planning. The report calls for policy reforms, enhanced transparency in retirement benefits, and a stronger push toward guaranteed income products such as annuities.

The report also found that 76% of respondents had not invested in annuity plans, even though these instruments can offer stable, long-term post-retirement income. Many participants prefer government-backed options like the EPF due to their perceived security, but low satisfaction levels with current returns suggest a growing demand for improved pension products.