Passage 1

A persistent issue with micro-pension schemes is their low uptake among the poor, who often have a strong urge to allocate limited funds toward immediate consumption. In this context, increasing participation can be achieved through behavioural interventions. These interventions could involve changing how information is presented, simplifying the enrolment process (for example, using UPI-enabled pension payments), and providing timely reminders. Young people in India may not feel an immediate need to secure an optimal pension plan. The old-age dependency ratio is about 15.7 per cent, which is significantly lower than in many Emerging Market Economies. However, this should not lead to complacency. The best time to repair a roof is when the sun is shining, not when it is raining.

Which of the following statements best reflect the most logical and rational inferences that can be made from the passage?

1.The design and promotion of existing micro-pension schemes do not adequately account for the behavioural tendencies and immediate financial priorities of the poor.

2.India's old-age dependency ratio presents a counter-argument that while the need for immediate pension reform is not urgent, but to reinforce the call for proactive measures.

3.The behavioural interventions focus on making the processes for pensions easier and psychologically appealing for the target group.

Select the correct answer using the code given below:

(a)3 only

(b)1 and 2 only

(c)1, 2 and 3

(d)2 and 3 only

Question

Passage 1

A persistent issue with micro-pension schemes is their low uptake among the poor, who often have a strong urge to allocate limited funds toward immediate consumption. In this context, increasing participation can be achieved through behavioural interventions. These interventions could involve changing how information is presented, simplifying the enrolment process (for example, using UPI-enabled pension payments), and providing timely reminders. Young people in India may not feel an immediate need to secure an optimal pension plan. The old-age dependency ratio is about 15.7 per cent, which is significantly lower than in many Emerging Market Economies. However, this should not lead to complacency. The best time to repair a roof is when the sun is shining, not when it is raining.
 

Which of the following statements best reflect the most logical and rational inferences that can be made from the passage?

1.The design and promotion of existing micro-pension schemes do not adequately account for the behavioural tendencies and immediate financial priorities of the poor.

2.India's old-age dependency ratio presents a counter-argument that while the need for immediate pension reform is not urgent, but to reinforce the call for proactive measures.

3.The behavioural interventions focus on making the processes for pensions easier and psychologically appealing for the target group.

 

Select the correct answer using the code given below:

(a)3 only

(b)1 and 2 only

(c)1, 2 and 3 

(d)2 and 3 only

ONLiNE UPSC · Accepted Answer

Statement 1 is correct: The passage states that a "persistent issue... is their low uptake among the poor, who often have a strong urge to allocate limited funds toward immediate consumption." It then suggests that "increasing participation can be achieved through behavioural interventions" like changing information presentation, simplifying enrolment, and reminders. This strongly implies that current schemes are not effectively designed or promoted in ways that align with or overcome these behavioural traits and immediate priorities of the poor.

Statement 2 is correct:  By acknowledging the currently lower dependency ratio, i.e. 15.7 per cent compared to many Emerging Market Economies, the passage addresses a potential point that might be used to argue against the urgency of pension reforms. Immediately following this with "However, this should not lead to complacency" and the "repair the roof" analogy indicates an intent to neutralize this potential argument and stress the importance of acting now despite this current statistic.

Statement 3 is correct: The examples provided in the passage, i.e. changing information presentation (making it more understandable/salient), simplifying enrolment (reducing effort/friction, e.g., UPI), and timely reminders (addressing forgetfulness or procrastination), all point towards making the choice and action of enrolling in a pension scheme less cognitively demanding, more user-friendly, and better aligned with how people actually make decisions, thus making it psychologically more appealing or easier to act upon.

Economics

Pension Schemes and Behavioral Economics

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