The Economics and Psychology of Long-term Savings and Pensions

This study explores the behavioural mechanisms that influence decision making processes in long term savings amongst lower income households.


Pensions and long-term savings are significant factors that contribute to boosting financial security in old age as well as drive financial inclusion efforts for poverty alleviation. A staggering 70% of the nation’s population is employed in the informal sector where they do not enjoy government or employe- based pension schemes, relying largely on voluntary contributions to long-term saving plans. A key concern for policy makers is encouraging the poor to save and save more for their old age, leading to more stable and secure financial prospects for them. This study aims to observe and identify issues surrounding participation in long term savings from a behavioural perspective amongst lower income households.


The study was conducted in partnership with Mann Deshi, a cooperative bank based in Satara district, Maharashtra, that is one of the few institutions allowed to mobilise public deposits. They also offer pension products to women from low-income backgrounds. Leveraging the strong network of marketing agents employed by Mann Deshi and using a randomised design covering 3300 of their low-income women clients, behavioural responses towards a pension product were observed and analysed in order to establish key behavioural principles that guide the decision-making process.

Key Findings

From the first experiment, the study finds that marketing and some forms of framing trigger interest in long-term savings; yet this does not translate into adoption. The second experiment successfully reveals some obstacles to adoption. By lifting these, in particular by providing assistance with form filling, adoption rises dramatically. The second experiment suggests that small changes to the design and marketing of longterm savings can result in strong rises in adoption. The study observes that, in the absence of the treatments, adoption was close to zero. While the first experiment generated significant interest, the magnitudes of the effects were low. Through the second experiment,  it identifies the main hurdle associated with adoption—paperwork and logistics. It is interesting that even a treatment without financial incentives (treatment C) had such high takeup effects (20%, highly statistically significant). 


Understanding behavioural mechanisms that are at play during decision making processes in long term savings, can point towards methods to lift barriers for the financially vulnerable. Findings from this study can help in the design of pension products and programs in order to positively influence and “nudge” behaviour towards investments into long-term savings. Identification of hurdles that stand in the way of accessing resources for long-term savings are instrumental to policy makers looking to incentivise and encourage greater participation in long-term savings and pensions. Findings will also add on to current research linking behavioural cues to design of better pension products and bring key insights into recent market trends and government efforts towards pension reforms.

Thematic Area

Financial Well-being and Social Protection

Project Leads

Karna Basu, Shailendra Singh Bisht




Mann Deshi Mahila Sahakari Bank