Abstract:
Sustaining adequate retirement savings has received increased attention as a result of
ageing population across the globe and an increase in retirement poverty. According to
Retirement Benefits Authority only 21% of the working population is part of pension
schemes. Perceived retirement saving adequacy is a measure of whether current retirement
savings are adequate for a comfortable retirement and should be classified as priority in
ensuring financial security at old age. Several studies show an increase in post
-
retirement
poverty which is occasioned by lack of preparedness over one’s active work life. Financial
literacy has been singled out as a major determinant of perceived retirement saving
adequacy however the results are inconclusive.
Furthermore, studies indicate that
financially sophisticated workers tend to make more rational financial decisions. The
objective of this study is to determine the
mediating effects of financial sophistication on the
relationship between financial literacy and perceived retirement saving adequacy among
University Public Employees in Kenya.
The study
was guided by
Victor Vroom’s Expectancy
Theory of Motivation
.
The study adopted explanatory research design and was anchored on
a positivist paradigm. The study used primary data from public university employees within
Nairobi Metropolitan area in Kenya. Questionnaires were used to collect
data. The research
targeted 17,320 employees and a sample of 390 was selected. Stratified systematic random
sampling was us
ed to arrive at the respondents
. Multiple regressions were used
and Sobel’s
test was used after which bootstrap test of the indirect effect was carried out.
Results
showed a positive relationship between FL and PRSA (
β=
.664, p<000), FL
and FS
(
β=
.8064, p<.000)
.
Further, financial sophisticated mediated the link between financial
literacy and retirement savings adequacy (
β=
.554) was
significant.
Based
on the findings,
financial literacy, financial sophistications have a significant effect on perceived retirement
savings adequacy among public university employees in Kenya. The findings of the study
suggest that financial literacy and sophistication should be intensified by both Government
institutions and private investors to improve knowledge and skills on financial matters. The
findings of the study will also help the government in transforming pension sector by making
notable improvements in turn will improve savings culture.
.