Assessing the Demand for Micropensions among India's Poor

Area of Science:

• Behavioral Economics
• Development Economics
• Public Finance

Background:

• Designing effective savings programs for low-income populations is crucial for old-age financial security.
• Understanding demand for financial products in developing economies informs policy interventions.
• Micropensions offer a potential solution to old-age poverty, but their design requires careful consideration.

Purpose of the Study:

• To test hypotheses regarding micropension design using a field experiment in India.
• To elicit demand for a basic micropension and its variants among a poor population.
• To identify key design features influencing uptake and contribution levels.

Main Methods:

• Conducted a field experiment in India with a poor population.
• Elicited demand for a basic micropension and variants with differing minimum withdrawal ages, government match rates, and lump sum withdrawal options.
• Analyzed stated preferences and willingness to contribute.

Main Results:

• 80% of respondents expressed interest in the micropension.
• Willingness to contribute was sufficient to cover approximately 40% of expected old-age consumption.
• Respondents highly valued features restricting early access to funds (minimum withdrawal age).
• Positive responses were observed for higher government match rates.

Conclusions:

• Micropension design significantly impacts demand in poor populations.
• Features promoting long-term savings, such as restricted access and government incentives, are highly valued.
• Policy interventions incorporating these design elements can enhance old-age financial security.