scholarly journals AWARENESS ON PENSION PLANS-A STUDY OF INVESTORS’ IN BENGALURU CITY

2021 ◽  
Vol 9 (2) ◽  
pp. 1017-1021
Author(s):  
Pushpa B.V.
Keyword(s):  
Financial Literacy ◽  
Economic Status ◽  
Pension Plans ◽  
Willingness To Participate ◽  
Defined Contribution ◽  
Financial Decisions ◽  
Defined Contribution Plans ◽  
Income Adequacy ◽  
To Come ◽  
And Gender

Individuals make inconsistent, irrational financial decisions mainly due to disproportionate time preferences. Bias and procrastination prevail. Along with a default option, there is a need for a customized plan with individuals' socio-cultural and economic status.  Low participation rates are mainly due to a lack of awareness of pension literacy and behavioral aspects. Individuals have failed to create a corpus to protect themselves for retirement as there is a lack of awareness to suitability of a plan to one’s situation, failure to measure income adequacy at retirement, not able to identify the link between contributions made and pension drawdown, etc. Age and gender differences prevail strongly. Defined contribution plans are likely to dominate in global pension model in the years to come. Individuals are ready to own their risk but have little control and knowledge to cover themselves. Frequent timely and prompt advice or counseling from investment advisors will enable participants to understand the need, identify suitable options and schemes, and provide themselves with sustainable long-term savings. This should convert willingness to participate to real participation. Keywords: Financial literacy, Pension knowledge, Defined contribution pension plans (DCP), irrational decision making, demographics.

Financial Literacy and Defined Contribution Pensions

2012 ◽  
Vol 44 (5) ◽  
pp. 280-290 ◽  
Author(s):  
John A. Turner ◽  
Dana M. Muir
Keyword(s):  
Financial Literacy ◽  
Conflicts Of Interest ◽  
Financial Education ◽  
Defined Contribution ◽  
Financial Advice ◽  
Financial Decisions ◽  
Defined Contribution Plans ◽  
Individual Accounts

The increasing importance of defined contribution plans, both as employer-provided plans and as mandatory individual accounts, has increased the responsibility placed on workers for making financial decisions. While early on it was assumed that workers would be capable of managing these accounts, studies have documented that many workers make financial mistakes. Financial education has been used as a remedy, but experience has shown that many workers are not interested and others do not follow up on changes they indicate they intend to make. The use of defaults for investments and increased transparency concerning fees are two further developments that have addressed this problem. Now, attention is turning increasingly to financial advice. However, often financial advisers have conflicts of interest that affect the quality and cost of the advice they provide. Some countries are enacting laws that address this issue.

On the Use of Intelligent Systems for the Modelling of Financial Literacy Parameters

2009 ◽  
Vol 2 (4) ◽  
pp. 17-35
Author(s):  
H. Tawfik ◽  
R. Huang ◽  
M. Samy ◽  
A.K. Nagar
Keyword(s):  
Financial Literacy ◽  
Educational Level ◽  
Credit Card ◽  
Intelligent Systems ◽  
Input Parameter ◽  
Support Vector ◽  
Financial Decisions ◽  
Relative Contribution ◽  
Main Determinants ◽  
And Gender

Research has shown that more young people lack good financial literacy and make poor financial decisions. Financial literacy is not only important for individuals, but also for families, financial institutions, and the entire economy. In this paper, artificial neural networks (ANNs) and support vector machines (SVMs) are used as tools to model the financial literacy levels of young university students across Australia and three Western European countries. The goal was to ascertain the students’ level of financial knowledge in relation to the use of credit card and loan facilities based on a number of input parameters such as age, gender and educational level. Sensitivity analysis is applied to determine the relative contribution of each input parameter to the overall financial literacy model. The experiments show that ANNs and SVMs exhibit promising results and capabilities for effectively modeling financial literacy. Our findings indicate that the main determinants of young people’s level of financial literacy include educational level, length of employment, age, and credit card status – in terms of the use of credit card facilities, and gender, living status and credit card status – in terms of the use of loan facilities.

scholarly journals Annuity choices and income drawdown: evidence from the decumulation phase of defined contribution pensions in England

2015 ◽  
Vol 14 (4) ◽  
pp. 412-438 ◽  
Author(s):  
JAMES BANKS ◽  
ROWENA CRAWFORD ◽  
GEMMA TETLOW
Keyword(s):  
Older Adults ◽  
Empirical Evidence ◽  
Financial Literacy ◽  
Pension Fund ◽  
Open Market ◽  
Defined Contribution ◽  
Private Provision ◽  
Financial Decisions ◽  
Financial Benefits ◽  
Welfare Implications

AbstractWe provide new empirical evidence on the importance of defined contribution pension wealth in England, and the nature of annuitization decisions taken by older adults who retire with such sources of wealth. Other things equal, financial literacy, and numeracy in particular, are important factors governing individuals’ choices over whether to shop around for an annuity as opposed to taking the ‘path of least resistance’ option and purchasing from their original pension fund provider. This has important policy and welfare implications given that buying an annuity on the open market has significant financial benefits for most people. In the context of the increasing reliance on private provision for retirement, the importance of individuals having the financial literacy to successfully navigate complex financial decisions late in life should not be underestimated.

How defined contribution plans and 401(k)s affect employer pension costs

2006 ◽  
Vol 5 (2) ◽  
pp. 175-196 ◽  
Author(s):  
TERESA GHILARDUCCI ◽  
WEI SUN
Keyword(s):  
Fixed Effects ◽  
Pension Plan ◽  
Ordinary Least Squares ◽  
Pension Plans ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Defined Contribution Plans ◽  
Pension Costs ◽  
Administrative Expenses ◽  
Pension Contribution

We investigate the pension choices made by over 700 firms between 1981 and 1998 when DC plans expanded and overtook DB plans. Their average pension contribution per employee dropped in real terms from $2,140 in 1981 to $1,404 in 1998. At the same time, the share of their pension contributions attributed to defined contribution plans was 23% in 1981 and increased to 68% in 1998. By analyzing pension plan data from the IRS Form 5500 and finances of the plan's sponsoring employer from COMPUSTAT with a fixed-effects ordinary least squares model and a simultaneous model, we find that a 10% increase in the use of defined contribution plans (including 401(k) plans) reduces employer pension costs per worker by 1.7–3.5%. This suggests firms use DCs and 401(k)s to lower pension costs. Lower administrative expenses may also explain the popularity of DC plans. Although measuring a firm's pension cost per worker may be a crude way to judge a firm's commitment to pensions, this study suggests that firms that provide both a traditional defined benefit and a defined contribution plan are the most committed because they spend the most on pensions. Further research, especially case studies, is vital to understand employers' commitment to employment-based pension plans.

scholarly journals Gender Impact on Personal Investment Strategies

2021 ◽  
Vol 18 (1) ◽  
pp. 32-45
Author(s):  
Mintautė Mikelionytė ◽  
Aleksandra Lezgovko
Keyword(s):  
Financial Literacy ◽  
Economic Status ◽  
Investment Decision ◽  
Relevant Literature ◽  
Investment Strategy ◽  
Personal Finance ◽  
Strategy Development ◽  
Investment Strategies ◽  
Financial Decisions ◽  
Personal Investment

Abstract Research purpose. This study is dedicated to investigating the peculiarities of personal investment decisions among female and male investors to analyse the gender differences that occur during personal investment strategy establishment processes. This study is based on the literature research and aims at exploring the existing knowledge on financial behaviour and gender influence on personal investment selection. The importance and originality of this study are that it assesses the collective evidence in the personal investment field and explores its processes through the prism of gender impact. The understanding of the gender bias impact on the personal investment strategy development process can play an important role in addressing the issue of gender inequality in finance and investment areas. This paper is dedicated to answering the question of how gender impacts personal investment strategies. Design/ Methodology/ Approach. The major task was to conduct the research on the male and female personal investment decision peculiarities presented in literature sources and to prepare the survey to conduct practical research while applying theoretical knowledge and presenting the findings along with the suggestions on how to improve the female situation in investment field. Findings. The most prominent finding to emerge from this study is that females lack knowledge and understanding in finance and especially investment areas; therefore, this leads to inadequacy in self-confidence in finance and investment matters and, as a result, neglect of successful personal finance management and, more significantly, poor investment strategy decisions. Originality/ Value/ Practical implications. The main goal of the current study was to determine whether the gender difference exists in personal finance and especially investment area, to refine the reasons behind this phenomenon, to analyse what could be done to improve the situation and introduce suggestions for further research. The research was done based on relevant literature, reports, surveys, statistical data used for literature analysis, and Lithuania’s case study for the practical part of the research. The primary objectives were to find out what are the main peculiarities between males and females when it comes to personal investment strategy choices and to analyse financial literacy and investment fields through the female perspective. The main points revealed during this study were that men tend to invest more often than women, as females, in general, prefer to save rather than invest; women tend to choose less risky investment strategies compared to men or save rather than invest. The main factors of this phenomena are the influence of cultural, social, or psychological factors, low financial literacy level, differences in economic status, longer life expectancy, the lack of confidence when it comes to knowledge applied to the financial decisions; males are more likely to choose a higher-risk investment strategy and to be more confident in their investment ability even if they have less knowledge on the matter. The analysis of Lithuania’s case has also confirmed the main literature review findings and reported females to lack financial and investment knowledge, spare funds and prefer to save rather than invest or invest into the low-risk tools.

Scrambling the Nest Egg: How Well Do Teachers Understand Their Pensions, and What Do They Think about Alternative Pension Structures?

2010 ◽  
Vol 5 (4) ◽  
pp. 558-586 ◽  
Author(s):  
Michael DeArmond ◽  
Dan Goldhaber
Keyword(s):  
Pension Plans ◽  
Washington State ◽  
Retirement Savings ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Administrative Records ◽  
Defined Contribution Plans ◽  
Alternative Plan ◽  
Defined Benefit Plans ◽  
Career Teachers

In this article we focus on two questions: How well do teachers understand their current pension plans, and what do they think about alternative plan structures? The data come from administrative records and a 2006 survey of teachers in Washington State. The results suggest that Washington's teachers are fairly knowledgeable about their pensions, although new entrants and mid-career teachers appear to be less knowledgeable than veterans. As for teachers' preferences for plan structure, the survey suggests that when it comes to investing additional retirement savings, a plurality of teachers favor defined contribution plans that offer more portability and choice but also more risk than traditional defined benefit plans. Again, perhaps unsurprisingly, the findings suggest that, all else equal, teachers newer to the profession are more likely than veterans to favor a defined contribution structure.

scholarly journals The Distribution of Investment Risk in Defined Benefit Pension Plans: A Reconsideration

2005 ◽  
Vol 51 (1) ◽  
pp. 136-157
Author(s):  
Douglas E. Hyatt ◽  
James E. Pesando
Keyword(s):  
Empirical Evidence ◽  
Pension Fund ◽  
Fund Performance ◽  
Pension Plans ◽  
Investment Risk ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Defined Contribution Plans ◽  
Defined Benefit Plans ◽  
Defined Benefit Pension Plans

The "textbook " description is that members of defined benefit pension plans bear no investment risk, in sharp contrast to members of defined contribution plans. Yet formal or informal bargaining may focus on the size of required employer contributions to a defined benefit plan. If at least some of the costs of such employer contributions are shifted back to workers, then members of defined benefit plans do bear investment risk. We utilize three sources of empirical evidence (a survey of pension specialists, econometric analysis, and case studies) to support the proposition that employees do bear at least some of the investment risk associated with pension fund performance. Poor fund performance leads to larger employer contributions to maintain the defined benefit obligation and this in turn leads to lower levels of other forms of compensation. We conclude that riskshifting does occur, in at least some plans, and that the textbook distinction is overstated.

scholarly journals FINANCIAL LITERACY AND RISK PROFILE: AN EXTENSIVE OBSERVATION ON BANK EMPLOYEES

2021 ◽  
Vol 19 (1) ◽  
pp. 175-186
Author(s):  
Sylviana Maya Damayanti ◽  
◽  
Pramudya Wicaksana ◽  
Keyword(s):  
Financial Literacy ◽  
Financial Management ◽  
Demographic Factors ◽  
Sampling Technique ◽  
Well Being ◽  
Risk Profile ◽  
Financial Decisions ◽  
Bank Employees ◽  
And Gender ◽  
High Level

People with a high level of financial literacy tend to have better financial management skills to realize their financial well-being through effective financial decisions including investing according to their risk profile. The banking industry is an industry that has the highest inclusive level selected because it can represent financial literacy conditions. On the other hand, the gap between financial inclusion and financial literacy leads to a large number of investment (illegal) cases and complaints to regulators. The purpose of this research is to find out the level of financial literacy and type of risk profile, factors that affect it with bank employees in Bandung as research objects. The sampling technique used is a non-probability sampling technique that is purposive sampling with a total of 408 respondents. Data collection is through online questionnaires. There are three sections questionnaire, demographic factors, financial literacy, and risk profile. The data processing techniques used are descriptive statistical analysis and multiple regressions. The results showed that bank employees in Bandung had financial literacy indexes categorized as “medium” or “sufficient” (66.7%) with a risk profile index of “moderate” type (60%). Demographic factors that affect financial literacy are age, education level, and organizational position. While the factor that affects the risk profile is age and gender. Research has also revealed a strong correlation between financial literacy and risk profile.

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