This blog was guest authored by Dr. Jared Gars, UF/IFAS assistant professor of Food and Resource Economics. For any questions about the following research study, please reach out to him directly at jgars@ufl.edu.
Context
In many developing countries, a large share of the workforce operates in the informal sector, without access to employer-sponsored retirement savings plans. This leaves millions of workers at risk of old-age poverty. In Colombia, for example, only 26 percent of elderly individuals receive a retirement pension. To address these gaps, the Colombian government introduced the Beneficios Económicos Periódicos (BEPS) program, which allows informal workers to make voluntary contributions towards their retirement. While the program provides flexibility in how much and when to save, many participants struggle to contribute regularly.
Behavioral factors such as procrastination and limited attention may explain low participation in voluntary savings programs. Forgetfulness, in particular, can prevent individuals from making consistent contributions. This study explores whether personalized reminders, aligned with individuals’ own saving plans, can help informal workers follow through on their intentions to save.
Intervention
In collaboration with Colpensiones, Colombia’s public pension fund, researchers conducted a randomized controlled trial with 2,819 BEPS participants. All participants were invited to create a personalized savings plan by selecting one day per month they thought would be optimal to make a contribution. Participants were then randomly assigned to one of four groups:
- Control group: Received only standard communications from BEPS.
- Plan only group: Created a savings plan but did not receive reminders.
- Personalized reminders (Forced): Created a plan and automatically received monthly SMS reminders aligned with their chosen dates.
- Personalized reminders (Choice): Created a plan and could choose whether or not to receive reminders.
The reminders incorporated participants’ selected dates and emphasized the benefits of saving, including qualifying for free life and disability insurance offered by BEPS.
Evaluation Design
The study ran over four months, from February to May 2022. Researchers collected detailed administrative data on participants’ savings behavior before and during the intervention. They measured outcomes such as the number of deposits made, total savings amounts, adherence to the saving plans, and qualification for insurance benefits.
Results
The study found that personalized reminders significantly improved savings behavior:
- Participants who received personalized reminders made 0.33 additional deposits on average during the four-month period, compared to the control group, a 17 percent increase.
- Total savings increased by 11,300 Colombian pesos (COP) over four months for those receiving reminders, representing a 17 percent increase over the control group.
- The effects persisted beyond the intervention period. Over the full year, participants who received reminders saved an additional 33,000 COP compared to the control group.
- Personalized reminders also increased the likelihood of qualifying for BEPS life and disability insurance by 4 percentage points.
Interestingly, while many participants recognized that forgetfulness hindered their savings, those who opted into receiving reminders were not necessarily the ones who benefited most from them. This suggests that individuals may misjudge how much support they need to stay on track.
Policy Lessons
This study highlights the potential of simple, low-cost interventions to improve retirement savings among informal workers. Personalized reminders, aligned with participants’ own plans, can help overcome attention constraints and encourage consistent contributions. As voluntary savings programs become more common in settings with high informality, integrating behavioral tools like personalized reminders could enhance their effectiveness.
However, the study also cautions that individuals may not always accurately assess their own need for reminders, suggesting that opt-out designs may be more effective than opt-in structures. Future research could further explore how individuals form beliefs about their own behavior and how to design reminder systems that best support sustained savings.
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