LIMITATIONS

The purpose of this study was to examine the factors associated with retirement savings amongst the low to medium income population of South Africa. Although the data used was from a robust national sample, some limitations existed as the data was self-reported (via face-to-face-interviews) and cross-sectional. There were also limitations in examining the three different constructs of financial literacy (financial knowledge, financial behaviour and financial attitude) and the causality of the relationships.

The main limitation of using cross-sectional data is that it is not possible to determine causality. The use of longitudinal data would be ideal to further investigate the relationships presented here. Some limitations may be attributed to the self-reported nature of the data as well. For example, the intention of the respondent with regard to the subjective questions is open to how the respondent interprets the question and / or statement.

The subjective nature of the variables was mainly prevalent in the financial attitude variable whereby respondents were required to agree or disagree with a particular statement regarding feelings towards the present and future. The survey questionnaire

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consisted of almost 300 questions in total and an aspect of human fatigue was not taken into account, especially with regards to answering the more technical questions for financial knowledge.

The eight financial knowledge questions used were somewhat broad in nature and did not specifically address retirement savings concepts, for example, questions about understanding of retirement planning. Knoll and Houts (2012) indicate that a more robust set of questions may provide a better indication of objective financial knowledge.

Another limitation with regards to the data set was the exclusion of individuals living in special institutions (i.e. hospitals, correction centres) because of challenges in obtaining permission to access these populations. The extent of selection bias introduced by this exclusion is unknown. However, for the population that was sampled, robust sampling methods that included stratification and proportional to size probabilities were used. In determining the sample, persons who refused to provide income information, persons who did not know income or persons with missing data were excluded from the sample. The exclusion of these persons may have introduced selection bias into our final analysis data set. Therefore, while results are inferred back to the general population, this is acknowledged as one of the study limitations.

The complete survey included over 300 questions which may have affected respondents’ ability or interest in completing the survey properly.

5.6 IMPLICATIONS

The following section purports to address the implications with regards to the conceptual model used in this dissertation, policy and future research.

5.6.1 Conceptual model

The conceptual framework underpinning this dissertation was based on the OECD’s working definition of financial literacy, which is defined as “a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being” (Atkinson & Messy, 2012).

This definition of financial literacy is well-fitting for this dissertation as saving towards one’s retirement is considered to be a financially sound decision (Rooij et al., 2011; Lusardi & Mitchell, 2006) and will ultimately bring about long-term financial well-being in

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the form of financial security during the period of retirement (National Treasury, 2012a). The three constructs of financial literacy (financial knowledge, financial behaviour and financial attitude) were tested separately. With the exception of association of financial attitude as compared between voluntary retirement savings and compulsory retirement savings, the findings in this chapter agree with the conceptual model that was proposed for this dissertation. Further research could look into how financial education affects financial literacy and ultimately, financial well-being. This would further substantiate the conceptual model and its usefulness in retirement planning policy, education and research as well as meeting the needs of consumers who fall within the low to middle income category.

5.6.2 Policy

Policy makers should consider a tailored approach to handling retirement savings issues by income level. A one-size-fits-all approach to retirement savings is not ideal to meet the needs of South Africans with varying income levels (Bester et al., 2008; National Treasury, 2012b; Statistics South Africa, 2014). The findings in this study highlight reasons for concern regarding the need for debt in order to make ends meet. This is something that government and policy makers need to look more closely to ensure the financial well-being of the average South African.

5.6.3 Future research

A longitudinal study would be ideal to gain a better understating of the changes a consumer goes through in a lifetime. It is important to analyse a consumer’s retirement savings behaviour over a longer period to determine the different factors that influence the decision to save over a lifetime, especially with changes in income level.

Future research could employ a more robust set of financial knowledge questions that are better linked to ascertaining the financial knowledge a consumer has behind retirement savings such as the impact of inflation and the changing world economy. Future research could also conduct an investigation into informal retirement savings vehicles such as housing and educating one’s children as this was mentioned by Bester et al. (2008) as a form of retirement savings vehicles for individuals who fall within the low income category.

The relationship between short-term financial behaviour and long-term financial behaviour could also be something that could be investigated in the future as it would

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provide further information as to the factors affecting long-term savings (Atkinson & Messy, 2012).

5.7 CONCLUSIONS

Based on the findings of this study, it can be concluded that there is a significant difference between an individual who voluntarily saves towards retirement and an individual who is compelled to save towards retirement via compulsory retirement savings vehicles. The same is also true in comparison to individuals who do not save anything towards their retirement. The financial literacy indicators determined by the OECD, namely, financial knowledge, financial behaviour and financial attitude, were seen to have an effect on the retirement savings behaviour of the three retirement savings groups. It is interesting to note that borrowing is prevalent amongst all three retirement groups as they strive to make ends meet. The demographic variables did not have much significance in explaining the differences in behaviour between the three groups as only race, marital status and education showed any significant difference. The scope of this study was to determine whether or not the financial literacy indicators had an effect on retirement savings behaviour. The magnitude of the effect was beyond the scope of this study

5.8 FINAL REMARKS

This study investigated the factors associated with retirement savings amongst the low to middle income population in South Africa. The research undertaken achieved the goal of the study as financial knowledge, financial behaviour, financial attitude, race, marital status and education level were identified as factors associated with retirement savings. This study was unique insofar as it provided another dimension with regards to retirement savings by comparing voluntary retirement savings to compulsory retirement savings and voluntary retirement savings to no retirement savings to gain a better understanding of the factors associated with retirement savings for those who are not compelled to do so. The findings of this study are not conclusive and more work is required to gain a better understanding in this complex area of retirement saving behaviour in South Africa.

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6.

APPENDIX