Saturday, 14 January 2017
Budget 2017 - A Retirees Perspective
While the Gen X, the Millennials and the Digital Natives are hogging up all the limelight and creating the much needed demographic dividend for our country, there are a large number of Indians, the Post-Independence kids, who have paid their dues to the nation and worked 60 hour weeks to bring the country to where it is today. These are the men and women, born after 1947, now in their sixties and beginning to enter their seventies.
While the younger generation of Indians less than 35 years constitute more than 65% of our nation, the category of individuals over 60 is also growing and will cross 100 million by 2020. These senior citizens span the large social strata of our nation across societies and income levels and, given today’s healthcare facilities, most of them should live for the next two to three decades.
The Prime Minister in his nationally televised speech on 31st December 2016 has recognised these senior citizens and announced an interest rate of 8% for a fixed deposit for a 10 year period. This is a great beginning but does the Government really recognize the needs of retirees?
What are retirees in India looking for from the much anticipated National Budget post demonetisation? This question is best answered if we consider the financial needs of retirees.
The Income Tax Act has two categories for senior citizens. Those between 60 years and 80 years who are referred to as Senior Citizens and those above 80 years who are referred to as Super Senior Citizens.
The tax free income is Rs 3.00 lakhs and Rs 3.50 lakhs respectively for the two categories. Senior and Super Senior citizens would benefit immensely if this limit were to be increased to Rs 5.00 lakhs and Rs 10.00 lakhs respectively.
Given the rapidity with which aging takes place, Government should consider three slabs for people between 60 years and 70 years; 70 years and 80 years and above 80 years. A 20 year slab for senior citizens is too vast.
Pension and Monthly Annuity
Barring the retirees from the Government and public sector, most other retirees do not have access to pension and have to rely on their savings. Most retirees have their savings in their provident fund, public provident fund, gratuity and some additional savings. This money is pulled out by them when they retire. Very few individuals know what to do with this large amount of life’s savings. There are very few pension schemes for retirees today. What every retiree is looking for is an investment whereby they can invest a lump sum and get a monthly annuity.
Government could think of introducing special incentives for mutual funds, banks and financial institutions to launch such financial products exclusively for people over 60 years of age.
The guiding principle for such financial products will have to be that they will develop Investment Plans with monthly returns while ensuring capital protection. Returns guidelines could be set at a minimum of 2% above the prevailing fixed deposit interest rate.
Senior citizens look for loans to build new homes and to expand existing homes since a lot of adult children are coming back to live in the homes of their parents. The Prime Minister has announced attractive reduction in interest rates for senior citizens who want to avail housing loans of upto Rs 9 lakhs and upto Rs 12 lakhs. In addition, the PM has announced an attractive scheme for people wanting to expand their homes in rural India.
Further subsidy on such loans at higher slabs and a similar subsidy for vehicle loans would be a welcome step for the senior citizens.
Most senior citizens in India are asset rich but cash poor.
Their homes, built on land purchased several decades back, are worth a lot of money and yet they struggle to meet their daily needs. Most of us in India believe that we need to leave our homes to our children who, I believe, have interest only in the value of their parent’s home and after their passing, most such houses are sold. While the Reverse Mortgage scheme is in place and Government has already provided that any money received through a Reverse Mortgage will be tax free, very few people are aware of this and even fewer take advantage of the scheme.
Government needs to popularize this Reverse Mortgage scheme and announce additional incentives so that senior citizens can unlock the huge value of their homes and live the last three decades of their lives in financial safety and security.
Subsidised Land to build Affordable Old Age Homes
Given the large number of senior citizens who are now living alone after having raised their children, the need for social security and friends in community living is becoming very critical. Support groups are forming rapidly as senior citizens start to depend on one another for support, instead of only their family members, in their sunset years. While assisted living homes are coming up in several parts of the country, these are expensive and highly priced. Builders are constrained to charge high prices because of the high cost of land.
The Government could consider giving subsidised land in the budget specifically for building such old age homes or assisted living homes. Price bands would need to be established so that genuinely affordable old age homes can be built and made available. Obviously very strict norms need to be in place to ensure such facilities are not misused by unscrupulous builders.
Almost 70% of Indians do not have access to any form of Medical Insurance. The largest group comprising over 300 million Indians are covered by Government Medical Insurance. Only about 75 million Indians are covered by private Medical Insurance companies.
Insurance premium up to Rs 15,000 is permitted as a tax deduction while this is Rs 20,000 for senior citizens. This limit needs to be increased substantially since premium is much higher even for a small medical cover of Rs 5 lakhs.
The Government also needs to encourage all employers to provide life time cover to their long serving employees. This insurance cover could become a part of the monthly human resource costs of every employer and the policy would continue on superannuation. While working with employers to ensure medical cover, the Government should also incentivise health insurance companies to cover a much larger group of citizens at reduced annual premiums.
Cost of Medicines
Government needs to provide funds in the budget to roll out the Jan Aushadhi stores across the length and breadth of India so that senior citizens can get access to reasonably priced medicines. At the same time more medicines should be brought under the Drug Price Control Order so that medicine prices are made more affordable.
While Governments in USA, Canada and several other developed countries provide retirees over 60 years the right to sign up for Medical Care at Government costs, no such scheme exists in India. There is a provision for the Economically Weaker Sections to get free medical care at Government owned hospitals but everyone knows that such facilities exist only on paper. This needs to change fast.
The Income Tax provisions allow a deduction of Rs 40,000 for medical treatment of specified diseases. For senior citizens this limit is Rs 60,000. Given the high medical costs, this limit needs to be increased significantly for senior citizens.
With no more recurring income from any form of employment, most retirees are relying on their retirement savings to support their needs for sustenance like utilities, food and most of all, medicines. Most retirees know that they progressing towards the end of their days and slowly, their bodies are beginning to give in to various forms of illness.
The Government, therefore, needs to play a significant role to support our senior citizens by providing tax incentives and financial support in the coming Budget so as to ease the financial strains most retirees face. Good long term schemes and well planned and executed tax reforms and incentives will go a long way in easing the anxiety and stress of retirement that all retirees face.
The author is the founder Chairman of Guardian Pharmacies and the author of 5 best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for an Eye; The Buck Stops Here - Learnings of a #Startup Entrepreneur and The Buck Stops Here – My Journey from a Manager to an Entrepreneur.
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