While more Indians are joining the National Pension System, a new study shows a significant gap between retirement goals and financial reality. With the average target corpus at ₹1.5 crore, many households still lack a formal plan, leaving them vulnerable to rising costs and longer life expectancies. Understanding this disconnect is a critical step for building long-term financial security.
Interest in India’s pension system is clearly on the rise. The National Pension System (NPS) Preference Index reached 57 in 2026, climbing from 54 in 2023, according to a recent study by HDFC Pension Fund Management. This growth reflects a shift in mindset, with more individuals viewing the scheme as a primary tool for old-age income rather than just a tax-saving instrument. As of June 2026, the combined subscriber base for the NPS and Atal Pension Yojana (APY) has reached nearly 9.95 crore, managing assets worth approximately ₹17.7 lakh crore.
Despite this momentum, a major disconnect remains between the savings targets households set and what they will actually need. The average target retirement corpus among respondents has risen to ₹1.5 crore, up from ₹1.34 crore in 2023. However, financial experts caution that this number often falls short of the true requirement. A significant 75.5% of surveyed individuals admit they do not have a detailed retirement plan, often relying on guesswork or the hope that family members will provide financial support in the future.
This over-reliance on informal support is a key risk. In reality, longevity is increasing, meaning savings must last much longer than in previous generations. Furthermore, the rising cost of medical care, with inflation in healthcare services often running between 12% and 14%, can quickly erode a fixed corpus. For many, a target of ₹1.5 crore might seem substantial today, but it may prove insufficient over a 20-year retirement period when adjusted for the rising cost of living.
Another structural challenge is the coverage gap within India's workforce. The vast majority of workers—nearly 90%—are part of the informal sector. These individuals frequently lack access to employer-sponsored retirement benefits, making them highly dependent on government-backed schemes or personal savings. Even for those in the formal sector, portfolios are often under-optimized, with a heavy skew toward debt instruments that struggle to beat inflation over the long term.
For investors, the data highlights that participation is only the first step. The more important monitorable is the shift from passive enrollment to active planning. Moving forward, households may need to look beyond arbitrary savings targets and focus on inflation-adjusted needs, asset allocation strategies that balance safety with growth, and a reduction in dependence on family-based support systems. As the pension system continues to evolve, the ability of individuals to create robust, self-sustaining retirement plans will be the defining factor in closing this financial gap.