Innovative saving products for seniors

Innovative saving products for seniors

Parts of India are greying rapidly, pushing up future spending on pensions and healthcare. True, India has moved to funded pensions when it is still young. But the need is to create an array of financial products that would encourage people to both save when they are young and to spend optimally in the initial state of their retired life, instead of saving too much in the face of uncertainty over their later years. Inadequate savings and insurance can impoverish the old, say, if there is a health emergency, while over-saving would be a drag on the economy.
Flexible financial products will encourage people to spend prudently. The National Pension System (NPS) manages the pension funds of civil servants who joined service after 2003 and of voluntary subscribers. A weakness of the NPS is the mandate to buy an annuity with a portion of the saved corpus.
The market for annuities is underdeveloped and offers little choice. Letting these subscribers stay invested even after retirement is an option, with the flexibility to invest in a capital asset of their choice at a time of their choice. The market for reverse mortgages, which allow homeowners to exchange their home’s equity for a lump sum or a stream of income in retirement, must also take off.
India also needs to develop a vibrant annuities market, and that, in turn, depends on a functional market for bonds. The larger point is to offer senior citizens innovative savings products. Hybrid saving and insurance products that ensure care in case of terminal incapacity would encourage active retirees to spend more to realise the highest quality of life they can afford. The economy stands to gain from this.
And, yes, the government will have to chip in with support for senior citizens who have neither savings nor relatives to take care of them.