Financial Knowledge and Retirement Planning among Pension Scheme Members in Kenya

Abstract

The rising cost of living, increasing life expectancy and high levels of old-age poverty in Kenya implies that many older people cannot afford necessities. Therefore, the need for individuals to plan for their future financial needs through planning for their retirement has become crucial. Unfortunately, most people who save for retirement in Kenya save with the National Social Security Fund (NSSF), which has a low replacement rate. Therefore, financial knowledge plays an indispensable role in influencing an individual’s retirement savings behavior. This paper seeks to establish the influence of financial knowledge on retirement planning in Kenya. The target population was members of the occupational retirement schemes, NSSF and individual retirement schemes in Kenya. A cross-sectional research design was used and a stratified sampling technique to obtain respondents. Using binary logistic regression and primary data from a sample of 332 randomly selected members of pension schemes in Kenya, the study found that financially knowledgeable individuals are more likely to plan comprehensively for their retirement. The study recommends the formulation of training and educational programs on critical financial concepts linked to retirement planning to spur pension schemes to actively participate in retirement savings.

Keywords: financial knowledge, retirement planning, Pension schemes, binary logistic regression.

DOI: 10.7176/RJFA/12-14-03

Publication date:July 31^st 2021