India’s retirement income replacement rate is just 35–40%: PFRDA chief explains why you need to save more
India’s retirement savings may not be enough to maintain the standard of living many workers have during their working years. Pension Fund Regulatory and Development Authority (PFRDA) chairman S. Ramann said India’s retirement-income replacement rate is currently around 35–40%, well below the roughly 60% level considered globally.
The comments, reported by The Hindu following an interaction with Ramann in Chennai on Friday, come as the pension regulator seeks to widen retirement coverage among workers outside the government sector.
A retirement-income replacement rate broadly measures how much of a person’s pre-retirement income is replaced by income after retirement. Ramann said the gap between India and the global benchmark underlines the need for people to save more during their working years.
“Roughly, the world says your replacement rate should be about 60%,” Ramann said. He put India’s level at around 35–40% and said the regulator needs to encourage people to invest more for retirement.
There is no one-size-fits-all retirement corpus
Ramann said PFRDA cannot prescribe a fixed amount that every individual should save for retirement because the required corpus depends on income, lifestyle and priorities.
Instead, the regulator can provide illustrations showing how regular contributions could potentially grow over time. For example, Ramann said a person investing ₹2,000 every month could potentially accumulate around ₹10 lakh after 18 years based on past performance. Such illustrations are not assured returns and the actual corpus would depend on investment performance and the period of investment.
NPS contributions currently vary sharply across subscribers, Ramann said. While some people contribute as little as ₹200 a month, others invest as much as ₹2 lakh a month.
The focus, therefore, is on encouraging a long-term savings habit rather than setting a uniform target for everyone.
PFRDA is also trying to bring more workers into the pension system. The regulator’s website shows NPS had 2.30 crore subscribers and APY had 7.86 crore active subscribers as of 16 August 2026.
Ramann said PFRDA wants to take the combined reach of NPS and APY to 30 crore people over the next four to five years. The regulator is particularly focusing on workers outside the government sector, including self-employed people, gig workers, farmers and MSMEs.
PFRDA pushes digital access and better returns
PFRDA is also using digital platforms to make it easier for people to join NPS. Ramann said the regulator is working on StAR NPS with BSE and NPS Tatkal with NPCI and BHIM, allowing banks, pension funds and distributors to onboard subscribers digitally.
The regulator is simultaneously looking at ways to improve the resilience of pension-fund returns. Ramann said pension funds need to diversify across asset classes while keeping volatility under control.
PFRDA has also been expanding the range of pension products and investment choices available to subscribers. Its website currently lists NPS Vatsalya and NPS-related initiatives alongside its core pension schemes.
For younger workers, Ramann’s message was particularly direct. Starting retirement savings early gives contributions more time to compound, while delaying the process can require substantially larger contributions later.
The retirement-income replacement gap is therefore a reminder that simply having a pension account may not be enough. The amount saved, the consistency of contributions and the length of the investment period can all determine whether a retirement corpus is sufficient to support life after regular employment income stops.
