India’s retirement savings face a new demographic test: Indian households are changing the way they save. Bank deposits are losing their dominance, while equities, mutual funds and systematic investment plans are taking a larger share of household financial savings. The Economic Survey 2025-26 shows that the share of equity and mutual funds in annual household financial savings rose from about 2% in FY12 to 15.2% in FY25. The share of bank deposits fell from more than 58% to around 35% over the same period. Average monthly SIP contributions rose sevenfold, from less than ₹4,000 crore in FY17 to more than ₹28,000 crore in April-November of FY26.
The shift represents a significant change in household financial behaviour. But it raises a question that is more consequential for an ageing India: how much of this money is actually being set aside for retirement?
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Investing regularly is not the same as building retirement income. Retirement savings require money to remain invested for decades, even when households face competing demands on their income. India is becoming more comfortable with financial markets. It is less clear whether enough households are accumulating assets that can support them after regular earnings stop.
Financialisation is not the same as retirement saving
The rise of equities, mutual funds and SIPs is evidence of a deeper financialisation of household savings. Market-linked assets give savers access to potentially higher long-term returns than bank deposits, although they also expose them to market risk. SIPs can help households invest regularly rather than trying to time the market.
Yet neither equity ownership nor a regular SIP automatically creates an adequate retirement corpus.
Chief Economic Adviser V Anantha Nageswaran has recently made a similar point, arguing that India needs to move more household savings towards long-term pension assets. The Economic Survey data he cited show that while equity and mutual funds have gained sharply in household savings, pension and insurance assets have not seen a comparable increase.
The distinction matters because retirement has a different financial requirement. A household investing for a house or a child’s education has a relatively identifiable financial target and, in many cases, a reasonably predictable date. Retirement has neither. A person reaching 60 may need income for another two decades or more. India’s latest ageing evidence shows that life expectancy at age 60 was 17.5 years for men and 19 years for women in 2015-19, with substantial differences between states.
A retirement corpus must therefore withstand a long period of withdrawals, inflation and rising healthcare expenses. A balance that appears adequate at 60 can become insufficient if it has to support a household into its 80s.
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India’s retirement savings: Ageing nation before pensions are deep enough
The demographic arithmetic makes the question more urgent. The UNFPA-IIPS India Ageing Report estimates that the share of Indians aged 60 and above will rise from 10.1% in 2021 to more than 20% by 2050. The number of older Indians is projected to reach about 347 million by then.
India still has a relatively young population and a substantial working-age population. That gives the country time to strengthen retirement provision. But the demographic window will not remain open indefinitely.
The depth of India’s pension system also remains limited. The Economic Survey 2024-25 estimated pension assets, including major schemes such as the Employees’ Provident Fund Organisation, at about 17% of GDP. It put the corresponding OECD average at more than 80%. The Survey separately noted that NPS assets amounted to another 4.5% of GDP.
These figures should not be read as a simple comparison of two pension systems. India has a much larger informal workforce and a different history of employer-linked social security. But the gap does indicate how much further the country has to go in building long-term retirement assets.
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Informal work makes the problem harder
The challenge is not only one of financial awareness or investment preferences. It is also a problem of income security.
The Periodic Labour Force Survey for 2023-24 found that 53.4% of regular wage and salaried employees in the non-agricultural sector were not eligible for any of the specified social-security benefits covered by the survey. These include provident fund or pension, gratuity, and health or maternity benefits.
For workers with irregular earnings, a fixed contribution over 25 or 30 years can be difficult to maintain. Frequent movement between jobs can also interrupt contributions. For many informal workers, the immediate priority is meeting current expenses, leaving little scope to lock away income for a distant retirement.
This is where the financialisation of savings has a limit. Market participation can broaden access to investment, but it cannot by itself solve the problem of inadequate and irregular incomes.
The traditional family has provided another form of old-age security. Parents have often depended on children for financial and physical support. Urbanisation, migration, smaller families and changing household structures make that arrangement less predictable than it once was. The UNFPA-IIPS ageing report documents the wider social and economic changes accompanying India’s demographic transition.
The next financial transition
India has made considerable progress in moving household savings into formal financial assets. The next task is to ensure that a larger share of those assets can generate income in old age.
That requires pension products that accommodate irregular incomes and allow workers to continue contributing when employment changes. It also requires greater participation among workers who have no employer-sponsored retirement scheme. For those who do accumulate a corpus, the system has to address a second problem: converting that corpus into income that can last through retirement.
The CEA has pointed out that accumulating a corpus by the age of 60 is only part of the task. Retirement income must last for as long as a person lives and retain purchasing power as prices rise.
India’s financialisation story will therefore be judged by more than the growing number of demat accounts, mutual-fund investors or SIP contributions. The harder test is whether households can accumulate enough long-term assets to reduce their dependence on children, avoid selling productive assets prematurely and maintain a reasonable standard of living after work.
For a country that is ageing while its financial markets deepen, building retirement security may prove to be the next major test of household financialisation.