Rising life expectancy, the shift towards nuclear families and a growing mismatch between retirement expectations and actual savings are reshaping how individuals plan for life after work, according to Niraj Shah, Executive Director and Chief Financial Officer at HDFC Life.
Shah said longer post-retirement lifespans have increased the need for structured and sustainable retirement planning.
Life expectancy in India has risen to around 71 years from about 62 years in 2000, extending the period for which individuals must generate stable income after retirement. At the same time, traditional joint family support systems are weakening, making financial self-reliance in old age increasingly necessary.
He noted that surveys point to a widening retirement savings gap, where individuals acknowledge the need for higher retirement corpus but fall short in actual savings behaviour.
This, Shah said, has placed focus on financial solutions that provide predictable income, protection against health-related expenses, and safeguards against outliving savings.
According to Shah, insurance-based retirement products aim to address several post-retirement risks, including longevity risk, uncertainty in cash flows, untimely death and morbidity. These plans are designed to provide long-term income streams, ensure continuity of income for spouses and allow individuals to leave behind a financial legacy for beneficiaries.
When comparing insurance-based retirement plans with other retirement savings options, Shah said individuals should consider factors such as their earning capacity, risk appetite and changing financial needs over time. He added that predictable and regular income, protection coverage and access to liquidity during emergencies are among the key requirements during retirement.
Shah explained that insurance retirement plans are available across the risk spectrum.
Guaranteed plans cater to conservative investors seeking stable and predictable income, while participating or hybrid plans offer a combination of assured benefits and bonuses. Market-linked plans suit individuals with a higher risk appetite, offering potentially higher returns but with exposure to market volatility.
“Returns, premiums and risk coverage vary depending on the structure of the product,” Shah said, adding that no single solution fits all investors. He suggested that individuals balance stability and growth by aligning products with their time horizon, risk tolerance and income needs. Those nearing retirement may prioritise guaranteed income and protection, while younger investors may consider market-linked options to counter inflation over the long term.
On taxation, Shah highlighted that retirement products also offer certain incentives under existing tax laws. Lump sum withdrawals from pension plans at maturity are exempt under Section 10(10A)(iii) of the Income-tax Act, 1961.
He also pointed to tax benefits available under the National Pension System (NPS), including an additional deduction of up to ₹50,000 under Section 80CCD(1B), and employer contributions under Section 80CCD(2), which are over and above the Section 80C limit.
Addressing flexibility, Shah said insurance retirement plans generally provide structured liquidity options, though features differ across products. Loans against traditional pension policies offer access to funds, while partial withdrawals may be permitted under specific circumstances such as critical illness or disability. Some annuity products also allow policyholders to increase contributions over time.
Shah cautioned that underestimating retirement needs remains one of the most common pitfalls. He said many individuals assume that gratuity, provident fund balances or employer benefits will be sufficient, without factoring in inflation and rising healthcare costs. Delaying retirement planning and failing to diversify investments in line with risk appetite can also lead to shortfalls.
He emphasised the importance of periodic reviews to adjust contributions and coverage as life goals and expenses evolve. Regular reassessment, Shah said, helps prevent both underfunding and excessive insurance coverage, ensuring retirement plans remain aligned with long-term financial needs.
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