Assessing factors that influence saving through retirement funds
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Date
2019
Authors
Seima, Motlatjo
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Abstract
Retirement planning is an important savings mechanism that requires a
collaborative and strategic approach from all the key stakeholders, mainly, the
employer and employees, underpinned by a sound state policy framework. The
need for this strategic alliance is direr in developing countries where social
security programmes are virtually non-existent. The unpredictability of financial
markets which retirement funds are exposed to, adds further complexity to an
already sophisticated process laden with numerous unknown and often
undefined variables. A positive savings culture is a non-negotiable and integral
core ingredient to a robust social security framework. This research seeks to
assess factors that are accepted as key influencers of savings for retirement for
member of the retirement funds in South Africa.
A cross sectional survey was used to collect the required data. Therefore, the
general population of this study comprised of members of retirement funds who
are aged 55 years and above, whose occupation retirement fund is a client of
Alexander Forbes. The study aimed to obtain at least 150 questionnaire
respondents via an online survey platform called Qualtrics by distributing the
link to the identified respondents. After gathering cross sectional data,
regression and descriptive statistics approach were used, where a sample of
130 responses out of a population of 150 members of retirement funds was
used. The research established that a correlation existed between saving for
retirement and the following factors; uncertainty about one’s health, education,
age, salary range and the level of education.
Correspondingly, the research recommends that employers, through financial
literacy programmes, can assist to enhance a culture of saving by empowering
the less educated employees to appreciate the benefits of long-term saving
through retirement funds. Obvious benefits like tax savings and compound
interest might not be apparent or completely misunderstood by employees of
lower literacy levels. A key recommendation for the retirement fund industry, the
employers and the government as interrelated stakeholders, is that financial
awareness which is more than just financial literacy should be prioritised across
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all the sectors of society. Basics of financial planning, like the cost of credit,
budgeting, taxation and pensions should perhaps be incorporated into the
schooling syllabus to ensure functional or operational understanding of these
concepts. To further entrench a culture of saving for retirement, the retirement
fund industry is challenged to design bespoke products to talk separately to
each sector of the market, to understand the differentiate the needs of the high
net individuals from those of the lower LSM (living standard measure). It is
suggested meaningful efforts in this regard, coupled with similar efforts in the
health sector, where the state sponsored healthcare system is acutely
overburdened, would result in upward surge of the key indicators of saving for
retirement.
Description
MBA
Keywords
Retirement income -- South Africa. Finance, Personal -- South Africa.