Effect Of Financial Literacy On Voluntary Retirement Planning Among Employees Of State Corporations Under The Ministry Of Health In Nairobi County, Kenya

Abstract

The lack of key financial information has been found to cause people to prepare inadequately for retirement. Financial literacy enables individuals to plan for retirement, make proper choices on pension products and contribute effectively in management of their pension schemes. The objective of this study was to determine the effect of financial literacy on voluntary retirement planning among employees of state corporations under the Ministry of Health in Nairobi County, Kenya. This study adopted a descriptive study design and the target population consisted of all the 8,637 employees working in State Corporations under the Ministry of Health in Nairobi, Kenya. The sample size was 368 respondents proportionately distributed across different state corporations. The study used primary data collected using a questionnaire. Data collected was analyzed using descriptive measures of central tendency including means, percentages, frequencies correlation analysis and the multiple regression analysis. The study established that the respondents had no budget for all their expenditure as indicated by a mean of 2.35, do not have a record of their income with a mean of 2.87, and have no idea on total expenditure on their basic needs every month as indicated by a mean of 2.46. The study revealed that most respondents pay all bills on time before due date as supported by a mean of 2.83, respondents do not had enough savings for old age with a mean of 1.62 and had no other forms of retirement packages apart from pension with a mean of 2.28. Respondents were currently not contributing to a pension plan over and above the mandatory deductions made by their employer since the mean was 1.72. The study concludes that gender influences saving patterns for voluntary retirement among employees of state corporations under the Ministry of Health in Nairobi County, Kenya. Financial literacy was found to have a positive impact on voluntary retirement planning. However the results indicate that other factors such as income levels, age, marital status and level of education are also strongly related to voluntary retirement planning. The study recommends that organizations in Kenya should provide their employees with financial literacy programs as well as financial planning training sessions. The study further recommends that financial education be developed to focus on financial planning aspects such as basic savings, debts, insurance and pension. This study focused on the effect of financial literacy on voluntary retirement planning among employees of state corporations under the Ministry of Health in Nairobi County, Kenya. The study recommended that similar researches be replicated in other organizations and the results be compared so as to establish whether there is consistency on effect of financial literacy on voluntary retirement planning among respondents in various organizations. Future studies should cover other variables of financial literacy. Future scholars should also employ the use of both primary and secondary data in future studies.