The need for building up a pension or annuity

You cannot beat old age with arguments. You cannot beat it with wealth either. What you need is a continuous and guaranteed flow of income. Read the story below and arrive at your own conclusions. Life insurance / pension is not a bad proposition as some people make it out to be.

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It was a working day in the last week of October 1995. I was then Manager, Pension & Group Schemes at the Kottayam Division of the Life Insurance Corporation of India. Sitting in my cabin, I was discussing strategies with officers of the department on procurement of new business.  A bald and rather shabbily dressed old man, probably in his seventies, entered the office and seated himself in a chair outside my cabin. When he had waited there for a few minutes, I requested an officer to check why he had come.

Since he wanted to meet me, he was shown in. He was sweating and looked tired, but grim. That he was well-educated and well-bred was evident from his manner of speaking. He told me his story briefly. He was an Iyengar* from Trivandrum, an M.A. in English literature. After college he had joined one of the leading automobile companies of India as an officer, risen to a very senior position and retired in 1976. On superannuation, he had received rupees seven lakhs (which was a tidy sum in those days) and a car from his employers.

Mr. Iyengar had nine children whose bringing up was his top priority in life. All the nine were given University education. Being very bright at studies, all of them were, in due course, well-settled in life with good employment and were also suitably married. His entire retirement benefit was spent in the process. But there was this deep sense of fulfillment he and his wife felt, that made the sacrifice worthwhile. They looked forward to a heaven of happiness! 

When the grandchildren arrived, however, the couple started feeling their age. Their children left one by one to set up their own homes. All of them led affluent life-styles. Mr and Mrs Iyengar were now all alone. In the evening of his life Mr Iyengar realized that he did not have enough money to support his old wife and himself. He did not wish to bother his children who were busy looking after their own children. Their affection, like water, did not flow upwards.

Mr Iyengar had come to beg. He needed some money to purchase his weekly   provisions. It was heart-rending. That a gentleman under whom several hundred or thousand people had worked was in such dire penury! He had no complaints against his former employer who, he felt, had paid him very well and when he had retired there was no practice of giving pensions in industries. He would not hear of a collection for his sake, it would be too insulting. So I gave him a small sum that I could spare. He accepted the cash, rose and kept his palm on my head and said ‘May God bless you! This is all I can give you. I am going home and will not contact anyone for a week as this is sufficient for a week’s rice.’ He then left.

From that day I decided to cover as many people as possible under pension schemes. With the right advice people can provide for the evening of their lives without much difficulty - to provide for at least one meal a day with their own money. (Over the years I have covered several hundred clergymen, evangelists and church workers of various Churches and others under pension schemes.)

In my lectures on pensions, this story is invariably drawn upon, when someone from the audience tells me about his expectations from his children or about the need for investing retirement benefits in the right way. I simply ask him if he meant to say that Iyengar loved his children less. One has to recognize changing social values and the fact that all those complicated investment calculations are not workable when one is in the evening of his life alone and in failing health. There is no substitute for a guaranteed pension till the last day of one’s life, I always insist.

*Name changed