Retirement Planning in India: The Transformation from Defined Benefit to Defined Contribution Models

Abstract: The transition from Defined Benefit (DB) to Defined Contribution (DC) pension models marks a significant shift in India's retirement planning landscape. Traditionally, DB plans assured retirees a fixed post-retirement income, typically based on a percentage of their final salary. However, factors such as rising life expectancy, increasing salaries, fluctuating investment returns, and the high cost of annuities have made DB schemes financially unsustainable. Many pension providers have struggled with underfunding, prompting a shift toward DC plans, where individuals bear investment risks, and retirement benefits depend on accumulated savings and market performance. This research examines the factors driving pension reforms in India, analysing the impact of shifting from DB to DC models on retirees, government finances, and economic stability. It explores the challenges and opportunities in this transition, including the role of financial literacy, policy interventions, and digital inclusion in enhancing retirement security. Findings suggest that while DC plans offer flexibility and transparency, they require individuals to take an active role in retirement planning, necessitating strong regulatory frameworks and financial education initiatives.