The Economics and Psychology of Long-term Savings and Pensions

Principal Investigators: Karna Basu (City University of New York) and Shailendra Singh Bisht (IFCAI Business School)
Research Team: Nayantara Sarma
LEAD Centre: Centre for Microfinance
Focus Area: Insurance & Pensions
Project Geography: Maharashtra
Partner: Mann Deshi Mahila Sahakari Bank
Status: On-going


India’s elderly potentially face significant economic insecurity. With life expectancy increasing, and non-existent old age security for most poor households, access to long-term savings and pensions is critical for the country’s poverty alleviation and financial inclusion efforts. In a country where over 70% of the population continues to be a part of the informal labor force and government or employer-based savings and pension schemes are absent, contributions to long-term savings products are largely voluntary. Given these barriers to financial security, one important question facing policymakers and financial institutions is how to encourage the poor to participate in long-term savings.

While some progress has been made in understanding how carefully-designed savings products can increase people’s participation (Karlan & Morduch, 2009), little work has been conducted on long-term savings in developing countries.

In this project, researchers utilize a pension product to study behavioral aspects associated with long term savings. Researchers hypothesize that the families most likely to adopt pension plans are ones that face greater risks, have less access to alternate sources of insurance, and are less certain about their children’s income. Better understanding of household decision-making processes could help policymakers design programs and products that encourage the poor to save for old age.


While India is host to some of the largest microfinance institutions in the world, regulatory restrictions prevent these institutions from offering long-term pensions and savings products. CMF’s partner organization for the study, Mann Deshi, a cooperative bank, is one of the few institutions allowed to mobilize public deposits and, one of the few institutions offering pension products to low-income women. Mann Deshi’s work is executed by a strong network of agents.

Using a randomized design, researchers hope to understand how certain features associated with the design and the presentation of a pension product affect participation and savings. For the study, 3300 existing clients of Mann Deshi were randomly selected from a list of 7038 clients. Selected clients receive three different types of marketing treatments, while other clients receive no intervention. After a visit from marketers, the Mann Deshi agents will follow up with treatment clients (across all treatment groups) to see if they are willing to purchase the product.

In the first treatment group, 825 individuals receive basic product information about Mann Deshi UTI pension plan. Marketers will visit potential clients and describe the pension scheme in a neutral way, with an emphasis on how they will be penalized for early withdrawal.

In the second treatment, 825 individuals receive basic product information (as in the first treatment) but they also hear a positively framed message. Marketers will “reframe” the penalty for early withdrawal, focusing more on the potential gains of long-term savings.

The last 825 treatment clients will be offered a slightly different pension product. They are given the option of being able to save weekly rather than monthly. The marketers will focus on the penalty for early withdrawal, while emphasizing the value of the product in transforming loose cash into something of higher value. The remaining 825 individuals will form the control group and will not receive any visits from marketers.

Study Status

Researchers have begun administering the marketing treatments and will follow this initial phase with a take-up survey. Though many of impacts of participation in a pension scheme are likely to be long-term, participation may have shorter-term impacts on consumption, financial behaviour, life aspirations and psychological well- being. Such impacts may be small and could take place over time. But the survey will help researchers to understand the impact of this pension product on participation rates and savings patterns. Researchers will observe, in particular, features that are neglected by neoclassical models of decision making such as; deadlines, positive communication, and voluntary commitment.

Related Resources

MannDeshi MasterData Master_Dataset
Project Documentation MDP_Project_Documentation
Policy Brief MDP Policy Brief
Questionnaire Consent
Baseline Questionnaire
Midline Questionnaire
Endline Questionnaire
Intervention Questionnaire
TakeUp Survey Questionnaire
TakeUp Survey SectionG
Piggy Bank Questionnaire