International vacation makes way for retirement planning

The surveys also reveal that single women feel more financially secure and talk to more people before making their investment decisions as compared to their married counterparts. Women also engage in their finances at a younger age by investing their money earlier than single men (25 years on average for women vs. 26 years for men) despite joining the workforce at the same age (24 years).

Households in India contribute nearly a fourth of the total savings in the country at 22.3 per cent in 2011-12,typically retail investors are seen as risk averse and lackadaisical when it comes to planning their retirement savings.

The two surveys — by Ameriprise Financial and another by rating and research agency Crisil — bring some interesting insights and point to a changing though perceptions of investors and better financial inclusion in the country.

For starters,Crisil’s index on financial inclusion — Inclusix has brought to the fore trends in access to banks and savings,which is the start of “formal financial saving instruments” in not only the large metropolitan cities but also remote districts of the country.

“Financial inclusion ensures that a range of appropriate financial services are available to every individual and that the individual understands and accesses those services. This includes a basic,no-frills banking account for making and receiving payments,a savings product suited to the cash flows of poor households,money transfer facilities,small loans and overdrafts,and insurance (life and non-life)”,the report points out.

While the Crisil Inclusix rose marginally to 40.1 for 2011 as compared to 37.6 in 2010 at the national level. The southern region led in the ratings while the north-eastern region remained the weakest.

Pointing out that deposit penetration is the key driver of financial inclusion in India,the study noted,“The number of savings bank accounts,at 624 million,is close to four times the number of loan accounts at 160 million.”

The top five states according to the index are Pondicherry,Chandigarh,Kerala,Goa,and Delhi while the bottom five states are Arunachal Pradesh,Chhattisgarh,Bihar,Nagaland,and Manipur.

In terms of small borrower accounts,many districts in Andhra Pradesh,Tamil Nadu,and Kerala have a higher ranking due to a widespread penetration of micro-credit loans in these states through self-help groups but said that in terms of agricultural accounts,states such as Haryana,Punjab,Uttar Pradesh that have traditionally high contribution to the farm sector are absent from the top slots.

Meanwhile,Ameriprise has also developed a Financial Intelligence Index from its survey that tracked the mass-affluent or households earning over Rs 12.5 lakh per annum in metropolitan cities.

While Mumbai topped the Financial Intelligence Index,Delhi came second and Chennai surprisingly took the last spot. (See Chart )

“Though Mumbai shows high preference towards having a diversified portfolio,utilising professional advice and investing early,it lags behind on goal-based planning and having a long-term approach,” the survey said,adding that Delhi’s respondents typically start to invest late.

The Index also studied the investment portfolio of each of the six cities (Mumbai,Delhi,Hyderabad,Pune,Bangalore and Chennai and noted that while Mumbai residents chose a well diversified investment portfolio,those living in Pune prefer investment in gold and real estate,while Bengaluru and Chennai prefer traditional investment products.

“Chennai is inclined towards gold and real estate while Bengaluru favours gold and fixed deposits besides mutual funds,” it said.

Retirement planning is also gaining traction in investors across these cities,Ameriprise said in the report titled “Trends and Insights into the Financial Goals of Indian Consumers – 2013”.

About a quarter (24 per cent) of all respondents in 2013 said their key priority is retirement planning,which marks a 140 per cent rise from 2012 when when only 10 per cent categorised it as a key priority.

In fact,coinciding with the continued global slowdown and higher interest rate regime,the report noted that many have opted to put large-ticket family purchases — for example,travelling around the world,buying secondary homes or cars —on hold to make way for retirement planning.

“The recession or a slowdown is certainly a global concern and people taking accountability for that and planning for their retirement is certainly a positive step,” said Kim M Sharan,president,Financial Planning and Wealth Strategies,Ameriprise Financial.

The Ameriprise Financial survey was carried out by TNS and surveyed nearly 700 working professionals across six cities — Delhi,Mumbai,Bangalore,Chennai,Hyderabad and Pune with incomes over Rs 12.5 lakh per annum to create a statistically representative sample of upwardly-mobile urban Indian professionals.

surabhi.prasad@expressindia.com