The Influence of Financial Literacy on Retirement Planning in South Africa

Abstract

Background: A shift in the retirement planning and pensions landscape has created an enormous responsibility for individuals to plan for their retirement provision actively. Very few South Africans reach the average retirement age of 65 years with sufficient funds to sustain themselves during their retirement. Purpose/objective: Using secondary data from the 2011 South African Social Attitudes Survey (SASAS), this study aims to examine the influence financial literacy has on the retirement planning of South Africans. The secondary aim of the study was to investigate the financial literacy and retirement planning behaviour of certain demographic groups: gender, age, race, education, and income levels. Design/methodology: Binomial logistic regression is used to establish if financial literacy influences planning for retirement. Findings: The results show that financial literacy significantly influences retirement planning. Furthermore, only 24% of South Africans actively plan for retirement and financial literacy was particularly low among women, less educated individuals and Black African people. Research limitations: Firstly, the study relies on self-reported measures. Secondly, the binomial logistic regression analysis only indicates the likelihood of an individual planning for retirement based on their financial literacy score. Originality/value: This study contributes to retirement planning literature as it is one of the few studies that explore retirement planning and financial literacy in the context of a developing country using a geographic, nationally representative sample.