Understanding the role of financial literacy in pension planning: Overview of national pension scheme

Financial security after retirement is a growing concern, especially in economies where Social Security schemes and systems are limited and not well-structured.The National Pension Scheme (NPS) serves as a structured retirement savings option, depending on the individual's financial literacy level.The need to understand financial concepts such as savings, investment, and the amount of annuity to be paid adds to the process of empowering individuals to make informed pension planning decisions.This examines the factors influencing pension-related decisions and barriers to financial awareness and provides strategies that could improve overall literacy.This is a descriptive study, based on secondary data, which discusses the role of financial literacy in pension planning with a specific focus on the NPS.The study examines conceptual and policy-based insights related to financial literacy and retirement preparedness.However, challenges such as lack of awareness, certain misconceptions, and financial preferences continue to hinder this participation in various pension schemes.The findings explain that individuals with adequate financial knowledge are more likely to understand pension options like the NPS and the benefits they offer, while limited awareness and behavioural biases continue to hinder participation (Ricci & Caratelli, 2017).The significance of the study lies in highlighting the need to bridge the gap between financial knowledge and pension adoption, especially among informal sector workers and the self-employed.The study advocates for financial education and awareness programs to improve pension inclusion and long-term financial security.This study aims to contribute to the policy discussion and to enhance public awareness which altogether contributes to the efforts to enhance retirement planning in India.