Retirement Preparedness of Public- and Private-Sector Employees: Evidence from Jaipur, India

Abstract

Despite saving a higher percentage of their income, private-sector workers in Jaipur are more poorly prepared for retirement than public-sector workers. This paper examines six measures of retirement readiness: retirement planning age, retirement needs assessment, retirement savings vehicle selection, inflation and tax awareness, retirement counseling sources, and estate planning. The paper compares six measures of retirement readiness obtained from a stratified survey of 800 public and private sector salaried workers: retirement planning onset, retirement needs assessment, retirement savings vehicle selection, retirement need for inflation and tax awareness, retirement counseling sources, and estate planning.

Public servants took the lead on all fronts. 42% had started to consider retirement planning (20% private), and 91% had taken up to estimate their retirement savings requirement (58% private). 78% had made an account for inflation (vs 49%) and 75% had a will or estate plan (vs 49%). A quarter of private employees did not plan for retirement at all, and a like proportion were not seeking advice. Public employees had a large stake in employee pensions (57%), and public employees held a significant amount of their wealth in illiquid real estate (43%), while private employees were more reliant on equities (40%) without a defined-benefit backstop.

Overall financial planning (F = 3.450, p = .064) was not significantly affected by retirement planning beyond the effect of other factors. This implies that retirement preparedness is not a stand-alone factor, but is rather part of planning behaviour. The results suggest that there is a gap in readiness that is driven by pensions that information will not bridge. The paper suggests such measures for private-sector employees as auto-enrolment, employer-matching contributions to NPS, and an inflation-compensated retirement calculator, along with low-cost estate-planning assistance