Impact of SMS Reminders on Pension Savings

Study Context

A key policy issue in low and middle-income countries is how to get participants in the informal sector to plan and save for retirement. The Mbao Pension Plan is a centralized micro-pension scheme targeted to informal sector workers in Kenya. To date, take-up and continued use of the product has been weak. Possible explanations include unpredictable earnings (especially for self-employed), delayed benefits, lack of familiarity with pension products, and limited experience with financial institutions.

Study Design

This study provided SMS savings reminders as a mechanism to increase the consistency and amount of pension savings among Mbao participants. Participants were randomized to receive either positively or negatively-framed reminders with varied frequency of SMS notices. Administrative data was obtained from Kenya’s Retirement Benefits Authority to shed light on frequency and amounts saved by participants. A survey provided further information on participants, including income, occupation, and use of other saving methods.

Results and Policy Lessons

The results of this study show that the SMS reminders influenced short-term savings, but not long-term. Preliminary discussions with service providers and the respondents point to the availability of short-term options that have automatic enrollment, accessible micro loans, and easy exit. Consequently, the research team determined that the Mbao pension plan must be aligned with these features.