A retired army officer’s letter to me. No change / edit from me.

Generally Army officers have very poor understanding of financial management and investment opportunities. Having a secure and sheltered career and most of the time busy with their work, most of them think of investment and management of finances only just prior to their retirement when they have their retirement benefits and their life time savings from Provident Fund.  Most of the officers, now, retire at 54 years of age at the rank of Colonel (Time scale). The average age of commission being 22 + Years, they have effectively 32 years of Service Life. With hardly any saving potential during their service life, their investments centres around contributing to the Provident Fund ( about Rs10000 + per month ), The army Group Insurance which gives extended cover after retirement.

It is only a  lucky few who are able to get allotment of Housing through the Army Welfare Housing Organisation . These officers are able to avail loan save on income tax. They could  also hire their accommodation through the Army  itself or through civil  to part finance the cost of housing.

For the bulk of the Army officers, the first 5-10 years of their earning goes towards meeting the needs of Transport and other  household consumer durables for setting up his family. In the next 20 years of their service life , they have to meet the cost of bringing up the family and children’s education.

There is a gross misconception among civilians that Army officers get everything free, their housing, food, clothes ,water etc. In fact the Army Officers have to pay for everything. The entitled ration is for the officer only and in case he is in a non-family station (which is about 40% of his service life if not more), his family can not share even that..

He pays for his accommodation at 10% of his pay. He pays for water, electricity on actuals. His furniture is charged at 2.5% of his pay.

In fact the bulk of the officers reach the 30%  bracket  for computation of income tax  (deducted  fully at source.)

I would say, apart from his compulsory savings of around Rs10,000 pm in Provident Fund and around Rs1500/- or so for Group Insurance, he is left with about 10% of his take home pay for savings. In case he is repaying loan on car or housing this is also not possible.

Generally, most of the officers get to plan their savings on retirement when they have a sizable accrual by way of  Commuting the pension, Cashing of leave pay, Provident Fund balance, Maturity value of Army Group Insurance. Most of this is parked in Post Office Monthly income Scheme or Fixed Deposits in nationalized Banks since  they are chary of investing in Stock markets.

It is my personal opinion that the Army officers need to be exposed to financial management right from the time they are in the Military Academy since they are now starting to earn from their cadet days itself.  It was not so earlier.

In the colonial era and even upto early sixties, the officers were generally drawn from financially well to do strata and had their parental / ancestral support . The intake in to the defence forces from such strata  is miniscule if not nil. Mostly middle class and lower middle class society is contributing to the recruitment of officers. Therefore it is all the more necessary that these officers are educated in the very beginning of their career on this aspect.