Aging comes with substantial, additional risk of becoming or remaining poor. The UN estimates that 1.2 billion people will be living in old age poverty by 2050 unless things change. In this webinar, Beryl Van Andel, addresses the need for long-term saving with a special focus on pension schemes. In some countries less than 20% of the population have money in a pension scheme and informal workers and women in particular are not saving for their future.
The 3 keys issues in saving for a long life are:
- Availability and regulation of financial long-terms savings products, that are tapered to the needs of informal workers
- Cost effected distribution: role of technology, security and usage
- Stimulate recurring savings and build trusted customer relationship
We know that everyone saves and the mechanism for the savings differs. For informal workers this may be saving in a group, with a trusted friend or through items such as gold, cows or cloth. Along with giving financial education, a micro pension product needs to be tailored to support the needs of informal workers. Beryl gave an example of a study in the Solomon Islands on a product called YouSave which has a two-account principle. This is when deposits are split 50/50 into a general account and a preserved account, allowing some funds to be accessible to cope with life’s emergencies and situations but ensuring some savings are kept until a pre-established pension age. There is also the added advantage of death insurance included. Due to the success of this product the two-account principle has been replicated in many other countries and Beryl recommends as a good approach. You can read more about YouSave here and also watch a promotional video.
The product itself and financial education alone is not enough, it is vital to consider distribution. From how people register and complete KYC to sign up, to how they can deposit and withdraw, and reliability of the platform itself. These need to be easy for the customer in order to build trust and can begin with needing an agent network. From the FSP’s perspective, the product must be low-cost to administer because of the small amounts involved, and therefore scaling to be digitised is the way to facilitate this.