Analysing the Relationship between Financial Related Factors and the Adoption of Private Retirement Scheme

Muhammad Ridzuan Abdul Aziz; Abidah Saad; Nik Mohd Hazrul Nik Hashim; Nusrah Samat; Salwaty Jamaludin

doi:10.21834/e-bpj.v10iSI28.6956

Authors

Muhammad Ridzuan Abdul Aziz Faculty of Business and Management, UiTM Cawangan Selangor, Malaysia
Abidah Saad Faculty of Business and Management, UiTM Cawangan Kedah, Malaysia
Nik Mohd Hazrul Nik Hashim Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi, Malaysia
Nusrah Samat Faculty of Business and Management, Open University Malaysia, Petaling Jaya, Malaysia
Salwaty Jamaludin Faculty of Business and Management, UiTM Cawangan Selangor, Malaysia

DOI:

https://doi.org/10.21834/e-bpj.v10iSI28.6956

Keywords:

Financial Literacy, Financial Risk Tolerance, Financial Attitude, Financial Well-Being

Abstract

Retirement planning is important to ensure sustainable living for individuals upon retirement. Unlike government pensioners, who are eligible for a pension upon retirement, private sector employees and self-employed individuals rely solely on their limited savings in the Employees Provident Fund. A private retirement scheme has been introduced by the government to help Malaysians build their retirement funds. Hence, this research presents a conceptual framework on the relationship between financial-related factors (financial literacy, financial risk tolerance, financial attitude, financial well-being, and financial behaviour) and the adoption of the Private Retirement Scheme in Malaysia. Research hypotheses are developed based on the proposed structural relationship.

References

Amagir, A., Groot, W., van den Brink, H. M., & Wilschut, A. (2020). Financial literacy of high school students in the Netherlands: Knowledge, attitudes, self-efficacy, and behavior. International Review of Economics Education, 34, Article 100185. DOI: https://doi.org/10.1016/j.iree.2020.100185

Aryan, L. A., Alsharif, A., Alquqa, E. K., Al Ebbini, M. M., Alzboun, N., Alshurideh, M. T., & Al-Hawary, S. I. S. (2024). How digital financial literacy impacts financial behavior in Jordanian millennial generation. International Journal of Data and Network Science, 8, 117-124. DOI: https://doi.org/10.5267/j.ijdns.2023.10.011

Bank Negara Malaysia. (2022). Economic and Monetary Review 2022. https://www.bnm.gov.my/documents/20124/10150285/emr2022_en_box1.pdf

Birkenmaier, J., Jung, E., McMillin, S., & Qian, Z. (2023). Are credit scores and financial well-being associated with physical health? Social Work in Health Care, 62(5), 162-178. DOI: https://doi.org/10.1080/00981389.2023.2207614

Chua, S.M., & Chin, P.N. (2022). What drives working adults to be better prepared for their retirement? Managerial Finance, 48(9/10), 1317-1333. DOI: https://doi.org/10.1108/MF-07-2021-0327

Consumer Financial Protection Bureau. (2015). Measuring financial well-being. https://files.consumerfinance.gov/f/201512_cfpb_financial-well-being-user-guide-scale.pdf.

Fan, Y. (2020). Does adversity affect long-term financial behaviour? Evidence from China’s rustication programme. Journal of Urban Economics, 115, Article 103218. DOI: https://doi.org/10.1016/j.jue.2019.103218

Federation of Investment Managers Malaysia. (n.d.). Understanding private retirement scheme. https://www.fimm.com.my/investors/understanding-investing/understanding-private-retirement-schemes/

Federation of Investment Managers Malaysia. (2015.). Private retirement scheme: Examination study guide.

Fitzsimmons, V., Hira, T., Bauer, J., & Hafstrom, J. (1994). Financial management: development of scales. Journal of Family and Economic Issues, 14(3), 257-274. DOI: https://doi.org/10.1007/BF01022180

Godwin, D. D., & Carroll, D. D. (1986). Financial management attitudes and behaviors of husbands and wives. Journal of Consumer Studies and Home Economics, 10, 77-96. DOI: https://doi.org/10.1111/j.1470-6431.1986.tb00110.x

Grable, M., Sharma, A., Mohanty, B., & Lahiri, M. M. (2024). Moderating role of personality in relationship to financial attitude, financial behaviour, financial knowledge and financial capability. International Journal of Sustainable Development & Planning, 17(6), 1997-2006. DOI: https://doi.org/10.18280/ijsdp.170635

Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 44(2), 296-316. DOI: https://doi.org/10.1111/j.1745-6606.2010.01170.x

Kaur, S. (2024, January 1). Poverty after retirement? New Straits Times. https://www.nst.com.my/business/corporate/2024/01/996049/poverty-after%C2%A0retirement#google_vignette

Mohd Ali, A. N., Yeon, A. L., & Hussain, M. A. (2016). Private retirement scheme in Malaysia: Legal analysis. International Journal of Economics and Financial Issues, 6(7), 290-295.

Munisamy, A., Sahid, S., & Hussin, M. (2022). Socioeconomic sustainability for low-income households: The mediating role of financial well-being. Sustainability, 14, Article 9752. DOI: https://doi.org/10.3390/su14159752

Perry, V. G., & Morris, M. D. (2005). Who is in control? The role of self-perception, Perry, V. G. & Morris, M. D. 2005. Who is in control? The role of self-perception, knowledge, and income in explaining consumer financial behaviour. Journal of Consumer Affairs, 39(2): 299-313. DOI: https://doi.org/10.1111/j.1745-6606.2005.00016.x

Potrich, A. C. G., Vieira, K. M., & Kirch, G. (2018). How well do women do when it comes to financial literacy? Proposition of an indicator and analysis of gender differences. Journal of Behavioral and Experimental Finance, 17, 28-41. DOI: https://doi.org/10.1016/j.jbef.2017.12.005

PricewaterhouseCoopers. (2024). Medical cost trend: Behind the numbers 2025. https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

Private Pension Administrator. (n.d.). Who we are. https://www.ppa.my/about-ppa/

Rahman, M., Albaity, M., Baigh, T. A., & Masud, M. A. K. (2023). Determinants of financial risk tolerance: An analysis of psychological factors. Journal of Risk and Financial Management, 16, Article 74. DOI: https://doi.org/10.3390/jrfm16020074

Remund, D. L. (2010). Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. Journal of Consumer Affairs, 44(2), 276-295. DOI: https://doi.org/10.1111/j.1745-6606.2010.01169.x

Rodrigues, C. G., & B. V., G. (2024). Financial risk tolerance of individuals from the lens of big five personality traits – A multigenerational perspective. Studies in Economics and Finance, 41(1), 88-101. DOI: https://doi.org/10.1108/SEF-01-2023-0013

Shah, N. A. M. A., Nasrul, M. A., Rahman, S. F. B. A., & Seviyana, D. (2023). Comparative analysis of Malaysian and Indonesian retirement plan. Lex Scientia Law Review, 7(2), 659-708. DOI: https://doi.org/10.15294/lesrev.v7i2.69847

Tay, C., & Qi, H. E. (2024, January 24). Cost of living issues here to stay despite slower inflation, says OCBC Bank. The Edge Malaysia. https://theedgemalaysia.com/node/698487

United Nations Population Division. (2022). World population prospects: The 2022 revision. https://data.un.org/Data.aspx?d=PopDiv&f=variableID%3A68

Yeon, A. L., Hussain, M. A., & Ramli, A. N. (2016). Framework of Malaysian private retirement scheme under Capital Markets and Services Act 2007. International Journal of Economics and Financial Issues, 6(7S), 56–61.

Zabri, S. M., Ahmad, K., & Lian, A. A. L. H. (2016). The awareness of private retirement scheme and the retirement planning practices among private sector employees in Malaysia. International Journal of Economics and Financial Issues, 6(6S), 120–124.