AWARENESS ON PENSION PLANS-A STUDY OF INVESTORS’ IN BENGALURU CITY

Abstract

Individuals make inconsistent, irrational financial decisions mainly due to disproportionate time preferences. Bias and procrastination prevail. Along with a default option, there is a need for a customized plan with individuals' socio-cultural and economic status.  Low participation rates are mainly due to a lack of awareness of pension literacy and behavioral aspects. Individuals have failed to create a corpus to protect themselves for retirement as there is a lack of awareness to suitability of a plan to one’s situation, failure to measure income adequacy at retirement, not able to identify the link between contributions made and pension drawdown, etc. Age and gender differences prevail strongly. Defined contribution plans are likely to dominate in global pension model in the years to come. Individuals are ready to own their risk but have little control and knowledge to cover themselves. Frequent timely and prompt advice or counseling from investment advisors will enable participants to understand the need, identify suitable options and schemes, and provide themselves with sustainable long-term savings. This should convert willingness to participate to real participation.

Keywords: Financial literacy, Pension knowledge, Defined contribution pension plans (DCP), irrational decision making, demographics.