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IJSSP
40,3/4
342
Received 26 September 2019
Revised 11 December 2019
11 January 2020
Accepted 12 January 2020
International Journal of Sociology
and Social Policy
Vol. 40 No. 3/4, 2020
pp. 342-365
© Emerald Publishing Limited
0144-333X
DOI 10.1108/IJSSP-09-2019-0193
Retirement concerns and financial
literacy in Brunei
Pg Md Hasnol Alwee Pg Hj Md Salleh and Roslee Baha
School of Business and Economics, Universiti Brunei Darussalam,
Bandar Seri Begawan, Brunei
Abstract
Purpose – Despite the inclusion of financial literacy in retirement studies, there are limited studies that look
into retirement concerns and how financial literacy plays a role in managing retirement concerns.
Understanding retirement concerns prior to retirement is important given how it affects retirement
satisfaction. Therefore, this paper aims at assessing the retirement concerns in Brunei and the role of financial
literacy in managing those concerns.
Design/methodology/approach – 700 government employees, divided into three groups, were interviewed:
Defined Contribution Plan (DCP) employees retiring in the next 10–15 years, DCP employees retiring in 20–30
years’ time and Defined Benefit Plan (DBP) employees retiring in the next 10 years. Pearson’s chi-square tests
and logistic regressions were used to ascertain significant relationships.
Findings – The results indicate the relatively younger DCP group is more likely to be financially literate
compared to senior groups however, these respondents are more inclined to focus on private home ownership at
this juncture. The findings also indicate the importance of knowing how much to save for retirement towards
determining those with an additional retirement plan, and consequently reducing their retirement concerns.
The value of financial advice is also significant in determining the amount to save for retirement and in
possessing an additional retirement plan.
Research limitations/implications – Results cannot be generalised to the population, as purposive
sampling was utilised due to the absence of a population frame.
Practical implications – The implications of the paper may provide value to policymakers to consider
approaches to enhance the quality of financial advice and provide sound knowledge in computing the amount
needed for retirement. Understanding the role of financial literacy vis-
a-vis retirement concerns may also be
useful for neighbouring countries with similar socio-cultural aspects such as Malaysia.
Originality/value – Given the limited research on retirement concerns and financial literacy, this paper is one
of the few to emphasise on the importance of knowing how much is needed to save for retirement, in relation to
retirement concerns. This may also be useful in other countries/communities with similar retirement context
such as those with relatively low retirement planning or with similar retirement schemes. Further, with the
1993 pension reform, there is no known publication on retirement concerns and expectations in Brunei. Left
unchecked, it may lead to poverty in old age and/or dependency on welfare institutions and family support.
Keywords Retirement, Financial literacy, Pension reform
Paper type Research paper
1. Introduction
Over the past few decades, the importance of financial literacy has led to financial research
ranging from identifying individuals likely to be financial literate, to determining the role of
financial literacy in debt management and bankruptcy. In the field of personal finance,
financial literacy is also commonly touched upon in retirement studies, given the potential
benefits that it can bring to retirement planning. For instance, Lusardi and Mitchell (2007),
when assessing early baby boomers, found knowledge on compounding as a key variable
across retirement planners compared to non-planners; planning is associated with wealth
holdings, whereby planners are relatively well-off compared to those who did not plan for
retirement. Other studies related to financial literacy vis-
a-vis retirement planning assess the
role of financial literacy in the use of retirement tools, including the asset allocation of
investment portfolios and use of financial advice, among others.
This research was funded using Universiti Brunei Darusalam (UBD) Research Grant.
 Besides the growing research on financial literacy, recent decades have also witnessed Retirement
several government reforms on pensions resulting in changes to retirement age and/or concerns and
pension schemes. These government reforms exist in developed and developing countries,
though each country has its unique context onto which pension schemes are developed.
financial
Nonetheless, a familiar theme when pensions are discussed relates to retirement concerns. literacy
Given the uncertainty of the future and the transition from working life to retirement,
retirement concerns notably sufficiency of retirement income, and is a key topic in the public
and private sphere. In this paper, unless stated otherwise, retirement concerns refer to the 343
level of confidence on retirement income sufficiency.
Despite the inclusion of financial literacy in retirement studies, there are limited studies
that look into retirement concerns, comparing the financially literate versus less financially
literate, and how financial literacy plays a role in understanding retirement concerns.
Understanding retirement concerns prior to retirement is arguably important given how it
affects retirement satisfaction and how it may lead to feelings that one may ‘never retire’ due
to insufficient retirement income (Hanna, et al, 2017). Understanding retirement concerns may
also assist policymakers to consider approaches to manage post-retirement concerns, within
the realm of financial literacy.
To further explore the relationship between financial literacy and retirement concerns, this
paper looks into groupings of individuals in Brunei, including those who fall into a Defined
Contribution Plan (DCP) known as Tabung Amanah Pekerja (TAP), and those who fall into a
Defined Benefit Plan (DBP) known as Government Pension. More specifically, this paper aims
at assessing the retirement concerns in Brunei and the role of financial literacy in managing
them. Such an understanding of the role of financial literacy vis-
a-vis retirement concerns may
also be useful for neighbouring countries with similar socio-cultural aspects such as Malaysia.
To facilitate this objective in understanding the relationship between financial literacy
and retirement concerns in Brunei, existing literature is detailed in Section 2, followed by a
background on retirement schemes in Brunei and the research design in Sections 3 and 4,
respectively. Towards the end, key findings and implications are discussed.

2. Review of literature
2.1 Financial literacy
Recent decades have witnessed a growing interest in financial literacy; studies of financial
literacy, such as that of Lusardi and Mitchell (2007), indicate those knowledgeable on finance,
such as compounding, tend to plan their finances which leads to wealth accumulation.
Further, in the USA, studies have indicated low levels of financial literacy among groups; the
National Council on Economic Education (2005) found women have lower scores than men,
and Hispanic as well as black students/adults have lower scores than white students/adults.
In other studies, basic financial questions have highlighted alarming levels of financial
illiteracy. Lusardi and Mitchell (2007), when assessing early baby boomers, aged 51–56,
found only 17.8 per cent were able to correctly answer a compounding question (compound
interest)[1] and 55.9 per cent accurately answered a question related to divisions (lottery
division)[2].
The United States is not alone in facing issues surrounding financial illiteracy; numerous
studies in both developed and developing countries highlighted low levels of financial
literacy (Lusardi and Mitchell, 2011a; Klapper et al., 2015). As Figure 1 shows, when a
compounding question was posed to over 150,000 nationally representative adults in more
than 140 economies, the finding indicates low understanding of compounding globally. Only
around 10 per cent were able to answer correctly, with the issue more pressing in emerging
countries, with less than 10 per cent able to provide the correct response (Klapper et al., 2015).
In terms of retirement, numerous empirical studies have highlighted the importance of
financial literacy. For instance, knowledge on compounding is found to be the most important
IJSSP WORLD MAJOR ADVANCED MAJOR EMERGING
50% ECONOMIES ECONOMIES
40,3/4

40%

344
30%

20%
Compound
interest
not correct
10%

Compound
interest correct
0%

Note(s): Height of the bar is the percentage of adults using a credit

Figure 1. card or borrowed from formal financial institutions
Understanding of
compounded interest
Source(s): S&P Global Finlit Survey and Global Findex database;
Klapper et al. (2015)

variable, among four types of questions asked in Lusardi and Mitchell (2007), as it is
statistically significant across groupings of retirement planners, while those who are not able
to answer the ‘lottery division’ question correctly, are likely to be non-planners. Their study
found those who planned their retirement are relatively well off compared to those who did
not plan. Similar findings on the value of financial literacy vis-a-vis retirement planning,
including the causality effect of financial literacy towards retirement planning, can be found
in Bucher-Koenen and Lusardi (2011), Lusardi and Mitchell (2011b), Lusardi and Mitchell
(2017) and Boisclair et al (2017).
Numerous studies have also touched upon the relationship between financial literacy and
investments involved in retirement. In the United States, Fisch et al (2019) highlighted the
need for a mandated employer-provided financial education, as they found workplace-only
investors who participated in an employer-sponsored 401 (k) plan are less financially literate
compared to those who made active retirement choices. They contended that not only are pre-
retirement investments potentially affected, but a lack of financial literacy would also affect
post-retirement withdrawals and investments. An example of the post-retirement decision-
making process in relation to financial literacy can be found in the United Kingdom; Loibl et al
(2017) found financially literate respondents are likely to choose lump sum payout over
annuities, as the financially literate are able to take into account complex annuity-linked
considerations to make an effective decision.
Closer to Brunei, Koh and Mitchell (2019) found the financially literate people in Singapore
possess diversified investment portfolios over the life cycle compared to the less financially
literate. Further, the importance of financial literacy is reflected in financial products used;
Koh et al (2019) found those financially literate aged between 50 and 70 years of age are more
likely to hold life, long-term care and health insurance, enhancing their retirement through
managing possible emergencies. Meanwhile in Malaysia, financially literate respondents are
found to actively participate in the stock market, potentially enhancing their retirement Retirement
returns (Mahdzan et al., 2017). concerns and
Where retirement planning is concerned, there are also studies surrounding the
relationship between advice and financial literacy. Lusardi and Mitchell (2011c) noted on
financial
the importance of experts and financial advice, whereby in their study, respondents who literacy
planned for retirement are likely to utilise formal tools such as financial experts and
retirement seminars as opposed to talking to family/relatives or co-workers/friends. The
superior knowledge of professional advisors is further highlighted in Fisch et al (2016), in 345
assessing the investment decisions of workplace investors (divided into high financial
literacy and low financial literacy) and professional advisors. Their findings highlighted
better investment outcomes for high-literacy workplace investors compared to low-literacy
workplace investors. However, superior outcomes are achieved by professional advisors,
signifying the value of financial advice and expertise. Similar findings on the value of
financial advice vis-
a-vis financial literacy are found in Disney et al (2015) who found credit
counselling as a substitute, rather than complementary, to financial literacy, notably for less
financially literate individuals; in their study, an increase in financial literacy resulted in a
lower likelihood of seeking advice from a credit counsellor.

2.2 Retirement planning

Elder and Rudolph (1999) hypothesised those who did not plan for retirement may belong to
the ‘surprise group’, finding retirement funds insufficient to sustain their living and forced to
make downward adjustments. Their findings indicate a positive relationship between
retirement planning and retirement satisfaction, even as income, health, marital status and
wealth are taken into account. Given the relationship between retirement planning and
financial literacy, it would be useful to break down the steps inherent in retirement planning.
The practice of retirement planning includes several steps[3] to ascertain if retirement funds
are sufficient, given current savings and retirement plans (Altfest, 2007). This includes:
(1) Review retirement goals
(2) Establish risks and tolerance levels
(3) Determine rates (such as inflation rates) and ages to be used for calculations
(4) Develop retirement incomes, expenses and desired capital withdrawals
(5) Calculate lump sum needed upon retirement
(6) Identify current assets available at retirement
(7) Assess if retirement expense exceeds expected income
(8) Reconcile needs and resources, with consideration of changes to strategies or
retirement expectations
(9) Finalise plan and implement
(10) Review and update
In certain practices, however, instead of steps 2 to 4, rules of thumb are commonly used. For
example, the US Department of Labor (n.d.) highlights a rule of thumb of 70 to 90 per cent of
pre-retirement income, depending on the desired standard of living, while the Centre for
Retirement Research (2006) estimates that 65 to 85 per cent of pre-retirement income will be
required to maintain pre-retirement living standards, depending on marital status and
income level. There is also variability on whether pre-retirement expenditures should be used
instead of pre-retirement income; Greninger et al (2000), in a study of financial planners and
IJSSP educators, highlighted a majority noted 70 to 89 per cent of pre-retirement expenditures as
40,3/4 being useful estimates. Despite the convenience, using rules of thumb could be misleading[4];
the preferred approach advocated by Mittra et al (2005), and implied in Altfest (2007), is for
individuals to estimate retirement expenditures in a budget format to reflect individual needs
rather than a generalised figure extracted from ranges.
At this juncture, the main emphasis is to estimate how much an individual may require in
retirement (step 4) and how much needs to be accumulated upon retirement (step 5). The
346 remaining steps (step 6 onwards) are to ascertain whether current investments will be sufficient
to achieve the amount needed for retirement. If there is a projected shortfall compared to the
amount needed for retirement, this would enhance retirement concerns that could be addressed
by altering investment strategies and/or managing post-retirement living standards.

2.3 Retirement concerns

If the planning process indicates a shortfall between desired and projected retirement income,
more often than not, individuals would likely be encouraged to increase their savings. Weiner
and Doscher (2008) stated two broad approaches to enhance retirement savings: (1)
‘Structural’ involves changes in policies/processes to encourage savings such as setting
enrollment by default, and (2) ‘Communication’ that pertains to enhancing information/
knowledge and perceptions to increase savings, which includes financial literacy initiatives.
An example of ‘Communication’ involves the study by Dolls et al (2018). Their study assessed
the German pension administration’s initiative to provide annual letters giving detailed
information that includes monthly pension in case of immediate disability, and monthly
pension at statutory retirement age if contributions are made and if contributions are not
made. In many aspects, this approach covers steps 4 to 7 of the retirement planning process,
helping individuals to consider if retirement investments are sufficient to meet retirement
needs. In their study, this led to an increase in private retirement savings, which would
mitigate concerns of retirement income insufficiency.
Ignoring issues on retirement concerns, be it income sufficiency or other concerns, will
significantly affect retirement. Van Solinge and Hankens (2008) on a Dutch sample found
retirement satisfaction is primarily linked to wealth, health and marital relationships; any
decline in these resources affects retirement satisfaction. In the United States, the Pew
Research shows 38 per cent of adults in 2012 stated they are either not too confident or not
confident at all that they will have enough funds to retire. In 2009, this figure stood at 25
per cent (Morin and Fry, 2012). Taken as a whole, the effects of insufficiency in retirement
income can be daunting. In assessing those that state they will ‘never retire’, Hanna, et al
(2017) found those with a DBP were less likely to state they will ‘never retire’. In contrast,
those who believe their funds will be very inadequate for retirement will likely highlight
they will ‘never retire’.

3. Case: retirement in Brunei Darussalam

Prior to 1993, two main retirement schemes for government employees were the Government
Pension and Old Age Pensions (OAP). The Government Pension was a Defined Benefit Plan,
with retirees attaining at least 75 per cent of their final salary as lifetime income (Hajah
Sainah, 2010), while the OAP is a universal pension scheme applicable to Bruneians. At
present, the OAP provides individuals aged 60 years and above BND250 (USD185)
per month.
The Government Pension is no longer applicable for public servants since 1993, replaced
by two existing pension schemes, TAP and Supplementary Contributory Pensions (SCP)
introduced in 1993 and 2010, respectively. Both are DCP schemes involving compulsory
contributions by participants, matched by the employer. A distinct difference is the principal
and returns from TAP are provided as a lump sum to participants at age 55 (the previous
retirement age in Brunei), while the OAP is an annuity with monthly disbursement from age Retirement
60 for a period of 20 years. In both schemes, participants may voluntarily add further concerns and
contributions, though employers are not required to match voluntary contributions.
In Brunei, there are limited studies examining retirement concerns and financial literacy.
financial
Ak Md Hasnol Alwee (2013) assessed savings motives of welfare and non-welfare recipients literacy
in the largest district, Brunei-Muara district, and found those in the private sector, self-
employed, working in agriculture and fisheries are 2.37 times more likely to save for
retirement (excluding TAP and SCP), compared to government sector employees. This is 347
interesting because the government had introduced SCP with the aim to increase retirement
saving, notably for lower pay scale employees. Therefore, it is possible that government
employees are underestimating their retirement needs compared to non-government
employees. However, these findings are not generalisable to the Bruneian population due
to the non-random sampling nature of the study.
In terms of retirement planning when asked if respondents have a financial plan, about 80
per cent of welfare recipients and 57 per cent of non-welfare recipients stated they have none.
The lack of a retirement plan for non-welfare recipients is not surprising as high-income
earners are 2.1 and 2.7 times more likely to plan for retirement compared to middle-income
and low-income earners, respectively. When assessed on knowledge of retirement planning,
high-income earners are 4.75 times more likely to answer correctly than low-income earners,
highlighting the relationship of earnings with retirement planning knowledge (Ak Md Hasnol
Alwee, 2013).
In the financial industry in Brunei, there is increasing emphasis to improve financial
literacy. In 2012, the central bank Authoriti Monetari Brunei Darussalam highlighted via their
policy statement, programmes intended to enhance financial literacy to the public (Authoriti
Monetari Brunei Darussalam, 2012). In 2015, 28th May was proclaimed as the National
Savings Day in Brunei, followed by the establishment of the Financial Planning Association
of Brunei Darussalam in 2016 to raise awareness on financial planning (Brudirect, 2016). In
2017, His Majesty the Sultan of Brunei established the National Financial Literacy Council
towards ensuring ‘. . .Bruneians are able to achieve the highest financial well-being, given
their resources and burdens, through the access to well-suited financial products,
independent information and advice’ (Authoriti Monetari Brunei Darussalam, n.d, p. 1).

4. Research design
This study is based on a cross-sectional design employing structured interviews on three
groupings of individuals in 2016. Due to the lack of a population listing of retirement
groupings, purposive sampling was undertaken. The groupings are:
Group 1 - DBP group (Defined Benefit Plan: Government Pensions; age 45–54).
Group 2 - Senior DCP group (Defined Contribution Plan: TAP and SCP; age 45–59).
Group 3 - Young DCP group (Defined Contribution Plan: TAP and SCP; age 23–34).
Out of 780 interviews, 687 (88 per cent) were deemed valid interviews. The breakdown is as
follows (see Table I):

DBP Senior DCP Young DCP Total

Table I.
Targeted Respondents 180 180 420 780 Breakdown of
Valid Responses 156 159 372 687 respondents, by
% of Valid Responses 87% 88% 89% 88% grouping
IJSSP Retirement concerns are gauged through the following questions:
40,3/4 (1) How confident are you that you will have enough money to take care of your expenses
during your retirement?
(2) How confident are you that you will have enough money to take care of your basic
needs during your retirement?
348 (3) How confident are you that your TAP/SCP/Government Pension will be enough to
take care of your retirement?
Possible responses include: Very confident, Somewhat confident, Less confident, Not At All
and I Don’t know.
With regards to financial literacy, the following three questions were posed.
Question 1 (Compounding)
Let’s say you have B$100 dollars in a savings account. The account earns 10 per cent
returns per year. How much would you have in the account at the end of two years?
[B$110/ B$115/ B$120/ B$121**/ None of the above/ I do not know]
Questions 2 (Mutual Fund)
A mutual fund is: [Similar to a savings account/ Similar to a fixed deposit/ Similar to a
bond/sukuk /None of the above**/ I do not know]
Question 3 (Diversification)
In general, when an investor spreads money between 20 stocks, rather than 2, the risk
of losing a lot of money: [Increases/ Decreases**/ Does not change/ I do not know]

Questions 1 and 3 are adopted from financial literacy studies gauging compounding and
diversification knowledge, respectively. Question 2 is ascertained given that investing in a
mutual fund would provide the cost-efficient approach to investment for Bruneians,
compared to individual stocks[5]. Responses are noted as ‘Financial Sophistication 3’ if all
three questions are answered correctly, and ‘Financial Sophistication 2’ for two correct
answers and so on.
Pearson’s chi-square tests and logistic regressions using SPSS are used to ascertain:
(1) Determinants of those less concerned, that is confident in meeting retirement needs.
(2) Determinants of those who possess an additional retirement plan.
(3) Determinants of those who are able to calculate amount needed for retirement.
(4) Socio-economic demographics and financial behaviour of those financially
sophisticated.
Multicollinearity, sample size and outlier issues are taken into consideration. The use of
Pearson’s chi-square test and logistics regression is pertinent considering categorical
variables are involved (Pallant, 2010).

5. Summary profile of respondents

In terms of similarities, across all groupings, the majority (over 90 per cent) are Malay
respondents. Between the two senior groupings (DBP and DCP), the differences in average
age are minimal, around three years apart, while the average age of the Young DCP grouping
is 29. With regards to marital status, both senior groupings are largely composed of married
respondents (around 80–90 per cent), while only 42 per cent of the Young DCP respondents
are married.
 With regards to differences, the DBP largely comprised male respondents (90 per cent) Retirement
compared to only 60 per cent for the DCP groupings. In terms of education, there is a sizeable concerns and
portion (47 per cent) of Young DCP respondents who have at least a bachelor’s degree, whilst
the largest portion of senior groupings have a pre-college qualification (DBP: 31 per cent,
financial
Senior DCP: 42 per cent). In terms of government division[6], over a third of the Young DCP literacy
respondents are in Divisions 1 and 2 (39 per cent), while a sizeable portion of the Senior DCP
and DBP respondents are in Division 4 (42 per cent) and Division 3 (44 per cent), respectively.
With respect to home ownership, around 75 per cent of those in the senior groups lived in their 349
own residence, while 71 per cent of Young DCP respondents lived in properties owned by
their parents or family members (see Table II).

6. Cross-tabulation results
6.1 Retirement concerns
Table 3 shows statistically significant differences between the DBP group and the DCP
groupings, in all aspects of retirement confidence, with the DBP group more confident on the
sufficiency of their pension. Figure 2 shows about 70 per cent of DBP respondents are either
very confident or confident that they will have sufficient funds to cover basic retirement
needs, compared to around 45 per cent of DCP groupings.
The lack of confidence in DCP groupings is more pronounced when asked on the default
retirement schemes (TAP and SCP); only about 20 per cent of respondents are confident of its
sufficiency. In contrast, 50 per cent of DBP respondents affirmed their pension’s sufficiency.
The responses are slightly better when asked if their retirement funds (including default
retirement schemes) would be enough to cover retirement expenses. For the DBP group, the
confidence level is at 51 per cent, while for the DCP groupings, the confidence level stands at
34 per cent. Though marginally better, it is alarming that only a third of DCP respondents feel
they can live beyond meeting basic needs; this suggests the majority of DCP respondents will
need to adjust their living standards downwards.
Another observation is the lower-than-expected level of confidence in the DBP group, as
only half of respondents are confident of meeting general expenses and indicated their
Government Pension scheme would be sufficient. The low confidence level may be attributed
to specific retirement concerns they may have; Table IV shows the weighted scores of specific
retirement concerns. The top two concerns are similar for all groups: (1) rising cost of living
and (2) unexpected expenses. However, the scores are higher for the DBP group, which
indicates a higher concern for rising living costs and ability to manage sudden shocks, which
may play a role in the lower-than-expected level of confidence.

6.2 Expectations: dealing with retirement concerns

Given the lack of confidence by the DCP groupings, it would be insightful to ascertain if they
undertook measures to mitigate these concerns. This includes ascertaining if they attended
financial events, received retirement advice, calculated the amount needed for retirement and
made other retirement plans aside from the default retirement schemes.
With regards to computing the amount needed for retirement, the findings are similar
amongst the groups. Figure 3 and Table V indicate about a third of respondents in all groups
have calculated the amount needed for retirement. The level of preparation for retirement
only improves slightly when asked if they have attended any financial events (seminars/
roadshows/briefings on financial literacy, awareness or planning), with about 40 per cent
stating as such. The only statistically significant difference amongst the groups can be found
in receiving retirement advice; the Young DCP group has a marginally higher proportion (38
per cent) that received retirement advice compared to senior groups (around 30 per cent).
IJSSP Variable N Mean Median
40,3/4
(i) Age DBP 156 51.28 52
Senior DCP 159 48.94 48
Young DCP 372 28.99 29

(ii) Gender Male Female Total

350
DBP 140 (90%) 16 (10%) 156 (100%)
Senior DCP 96 (60%) 63 (40%) 159 (100%)
Young DCP 223 (60%) 149 (40%) 372 (100%)
Total 459 (67%) 228 (33%) 687 (100%)

(iii) Marital status Single Married Divorced/Widowed Total

DBP 12 (8%) 143 (91%) 1 (1%) 156 (100%)

Senior DCP 11 (7%) 134 (84%) 14 (9%) 159 (100%)
Young DCP 213 (57%) 156 (42%) 3 (1%) 372 (100%)
Total 236 (34%) 433 (63%) 18 (3%) 687 (100%)

Adv./Higher Bachelor ’s
Up to Pre- College/ national degree/
(iv) Education year 9 college Diploma diploma Postgraduate Total

DBP 16 (11%) 48 (31%) 37 (24%) 28 (18%) 25 (16%) 154 (100%)

Senior DCP 22 (14%) 66 (42%) 26 (16%) 15 (9%) 30 (19%) 159 (100%)
Young DCP 8 (2%) 67 (18%) 51 (14%) 69 (19%) 176 (47%) 371 100%)
Total 46 (7%) 181 (27%) 114 (17%) 112 (16%) 231 (34%) 684 (100%)

(v) Race Malay Chinese Others Total

DBP 150 (96%) 4 (3%) 2 (1%) 156 (100%)

Senior DCP 153 (96%) 1 (1%) 5 (3%) 215 (100%)
Young DCP 347 (93%) 20 (5%) 5 (1%) 372 (100%)
Total 650 (95%) 25 (4%) 12 (2%) 687 (100%)

(vi) Division Division 1 & 2 Division 3 Division 4 Division 5 Total

DBP 44 (28%) 69 (44%) 39 (25%) 4 (3%) 156 (100%)

Senior DCP 28 (18%) 41 (26%) 66 (42%) 24 (15%) 159 (100%)
Young DCP 142 (39%) 103 (28%) 93 (26%) 26 (7%) 364 (100%)
Total 214 (32%) 213 (31%) 198 (29%) 54 (8%) 679 (100%)

(vii) Home Privately owned property/ Owned by parents or Rented

ownership Owner-occupied family members property Total

DBP 129 (83%) 9 (6%) 17 (11%) 155 (100%)

Table II. Senior DCP 118 (74%) 23 (15%) 18 (11%) 159 (100%)
Summary profile of Young DCP 64 (17%) 263 (71%) 44 (12%) 371 (100%)
respondents Total 311 (45%) 295 (43%) 79 (12%) 685 (100%)

In terms of having an additional retirement plan aside from the default schemes, Figure 4 shows
a slightly higher proportion (around 50 per cent) of DCP group has an additional plan compared
to the DBP group (40 per cent). This finding is not surprising as the DCP group is expected to
possess an additional plan compared to the DBP group; however, the percentage is lower than
expected. Earlier, Figure 2 shows only 20 per cent of DCP grouping is confident their default Retirement
retirement schemes are sufficient, which means the remaining 80 per cent would ideally have an concerns and
additional retirement plan. However, with only 50 per cent having an additional plan, 30 per cent
of both DCP groupings may be underprepared for their retirement.
financial
With regards to the quality of retirement plan, Table VI indicates the statistical literacy
significance of the variables, and Figure 4 indicates that of those with an additional
retirement plan, only around 40 per cent in the three groups have a financial professional
assisting them with the plan. However, there is a higher proportion of Young DCP 351
respondents (58 per cent) with their plan, either written or in a computer file, compared to
senior respondents (34–42 per cent), indicating the somewhat concrete nature of their plan.

No. Retirement confidence Results

1 How confident are you that your TAP/SCP/Government Pension will be χ (4) 5 58.196, p < 0.00
2

enough to take care of your retirement?

2 How confident are you that you will have enough money to take care of your χ2 (4) 5 27.379, p < 0.00 Table III.
basic needs during your retirement? Chi-square results –
3 How confident are you that you will have enough money to take care of your χ (4) 5 19.939, p < 0.05 retirement confidence,
2

expenses during your retirement? by retirement grouping

How confident are you that you will have enough 34%
money to take care of your expenses during your 34%
retirement? 51%

How confident are you that you will have enough 48%
money to take care of your basic needs during your 43%
retirement? 69%

How confident are you that your 19%

TAP/SCP/Government pension will be enough to take 21%
care of your retirement? 50% Figure 2.
Percentage of
0% 10% 20% 30% 40% 50% 60% 70% 80% retirement confidence,
by retirement grouping
DCP/TAP&SCP(Young) DCP/TAP&SCP(Senior) DBP/Pensions

DCP/tap & SCP

No. (Young) Score DCP/tap & SCP (Senior) Score DBP/Pensions Score

1 Rising cost of living 1.03 Rising cost of living 0.94 Rising cost of living 1.11
2 Unexpected Expenses 0.75 Unexpected Expenses 0.84 Unexpected Expenses 0.88
3 Cost of children’s 0.56 Cost of children’s 0.59 Cost of children’s 0.50
education education education
4 Cost of healthcare 0.23 Unable to pay debt/ 0.19 Cost of healthcare 0.19
credit
5 Unable to pay debt/ 0.20 Cost of healthcare 0.18 Unable to pay debt/ 0.16
credit credit
6 Cost of housing/rental 0.18 Cost of housing/rental 0.13 Falling returns on 0.08 Table IV.
savings/investment Weighted scores of
7 Falling returns on 0.06 Falling returns on 0.12 Cost of housing/rental 0.08 ranked retirement
savings/investment savings/investment concerns
IJSSP
40,3/4 I have received retirement advice 31%
38%

30%

44%
I have attended seminars, roadshows or briefings on
352 financial literacy, awareness or planning.
39%
45%

Figure 3.
Percentage of
34%
respondents who I was able to calculate how much I needed to save for
received advice, 36%
retirement
attended financial 39%
events and calculated
retirement needs, by 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
retirement grouping
DCP/TAP&SCP(Young) DCP/TAP&SCP(Senior) DBP/Pensions

Table V.
Chi-square results – No. Question Results
retirement advice,
attended financial 1 Have you ever received any retirement advice? χ2 (2) 5 4.716, p < 0.10
events and computed 2 Have you ever attended any seminars, roadshows or briefings on financial χ2 (2) 5 1.321, p > 0.10
retirement, needs by literacy, financial awareness or planning?
retirement grouping 3 Have you ever tried to calculate how much you need to save for retirement? χ2 (2) 5 1.004, p > 0.10

Yes, aside from your TAP/SCP/Government pensions, I 48%

50%
have other preparation for my retirement.
37%

Yes, the preparation or retirement plan is in the form of 58%

34%
a written document or a computer file.
42%

Figure 4.
44%
Percentage of Yes, a financial professional help me to prepare this
36%
respondents having plan.
35%
additional preparation
for retirement, by 0% 10% 20% 30% 40% 50% 60% 70%
retirement grouping
DCP/TAP&SCP(Young) DCP/TAP&SCP(Senior) DBP/Pensions

6.3 Financial literacy

Table VII shows the results when financial literacy questions are tested against the three
groups. For all financial literacy questions, there is a significant relationship between
financial knowledge/sophistication and the groupings. Figure 5 illustrates that with the
exception of mutual funds, the Young DCP group is more likely to answer the questions and
possesses higher level of financial literacy. For instance, there is a high proportion of Young
DCP respondents (54 per cent) who correctly answered at least one question compared with
Senior DCP (35 per cent) and DBP respondents (34 per cent). A similar pattern is observed in
Financial Sophistication 2, with 16 per cent from the Young DCP group able to answer two
questions accurately, relative to the senior groupings (9 per cent each).
 Despite the low financial literacy levels, the potential benefits of financial literacy are Retirement
illustrated when concerns of meeting expenses and basic needs are assessed against those concerns and
possessing Financial Sophistication 1 and 2. Table VIII and Figure 6 show respondents who
answered at least one question correctly are more confident of meeting their basic needs and
financial
general expenses. For instance, 60 per cent who are either confident or very confident of literacy
meeting basic needs could answer at least one question correctly compared to 46 per cent who
could not answer any questions correctly. Additionally, there is a higher incidence of
respondents being confident/very confident in meeting retirement expenses (46 per cent) if 353
they answered at least one question accurately, compared to those who could not correctly
answer any questions (31 per cent).
Similar trends are found when retirement concerns are assessed against Financial
Sophistication 2 as shown in Figure 7. To further explore insights into financial literacy vis-

a-vis retirement concerns, logistic regressions are undertaken.

7. Regression results
7.1 Determinants of retirement concerns
To better understand retirement concerns, logistic regressions were undertaken to determine
variables that contribute to confidence in covering general expenses (Table IX) and meeting
basic needs (Table X).
7.1.1 Demographic variables. With regards to meeting general expenses, salary, education
and grouping are found to be statistically significant. Lower-scale (Division 5) employees are
5.21 times less confident of meeting retirement expenses compared to Divisions 1 and 2
employees, and those with pre-college qualifications are 2.26 times less confident compared to
those with degrees. In addition, the Senior and Young DCP groups are 2.10 times and 3.11
times less confident in meeting retirement expenses, compared to the DBP group, respectively.
In terms of basic needs, salary and groupings are found to be statistically significant.
Lower-paid (Division 5) employees are 11.36 times less confident of meeting basic expenses
compared to Divisions 1 and 2 employees. Further, both DCP groupings are 2.50 times less
likely to be confident compared to the DBP group.
7.1.2 Financial-related variables. With respect to meeting general retirement expenses,
being able to calculate the amount needed for retirement has the highest likelihood ratio;

No. Source of financial advice Results

1 Yes, aside from your TAP/SCP/Government Pensions, I have other χ2 (2) 5 6.277, p < 0.05
preparation for my retirement Table VI.
2 Yes, the preparation or retirement plan is in the form of a written document χ2 (4) 5 14.248, p < 0.05 Chi-square results –
or a computer file retirement preparation
3 Yes, a financial professional help me to prepare this plan χ2 (4) 5 4.378, p > 0.10 by retirement grouping

No. Financial question / Level Results

1 Compounding χ (2) 5 24.601, p < 0.00

2
Table VII.
2 Mutual Fund χ 2 (2) 5 7.488, p < 0.05 Chi-square results –
3 Diversification χ 2 (2) 5 11.192, p < 0.05 financial literacy
4 Financial Sophistication 1 χ 2 (2) 5 25.908, p < 0.00 question/level, by
5 Financial Sophistication 2 χ 2 (2) 5 7.674, p < 0.05 retirement plan
6 Financial Sophistication 3 Fisher Test: < 10% grouping
IJSSP respondents who are able to compute the amount are three times more likely to be confident in
40,3/4 meeting general expenses. Furthermore, attending financial events and having an additional
retirement plan are also found to be significant, as these respondents are about 1.5 times[7] more
likely to be confident. In addition, where knowledge is concerned, those who fall under Financial
Sophistication 1 are 1.53 times more likely to be confident in meeting general expenses.
Where meeting basic needs are concerned, being able to compute the amount needed for
retirement also demonstrated the highest likelihood ratio; respondents are 2.05 times more
354 likely to be confident if they computed the amount needed. Further, those having an
additional retirement plan and those falling under Financial Sophistication 1 are 1.97 times
and 1.41 times[8] more likely to be confident in meeting basic needs, respectively.

Financial Sophistication 3 0%3%

2%

Financial Sophistication 2 9% 16%

9%
Financial Sophistication 1 35% 54%
34%
Diversification 32%
23%
19%
Mutual Funds 4% 9%
Figure 5. 12%
Percentage of correct Compounding 32%
responses on financial 14% 18%
literacy questions, by 0% 10% 20% 30% 40% 50% 60%
grouping
DCP/TAP&SCP(Young) DCP/TAP&SCP(Senior) DBP/Pensions

Table VIII. No. Retirement needs Results

Chi-square results –
meeting basic needs 1 Financial Sophistication 1 vs. Meeting Basic Needs χ (2) 5 15.524, p < 0.00
2

and general expenses 2 Financial Sophistication 1 vs. Meeting Retirement Expenses χ 2 (2) 5 19.918, p < 0.00
upon retirement, by 3 Financial Sophistication 2 vs. Meeting Basic Needs χ 2 (2) 5 14.352, p < 0.05
financial sophistication 4 Financial Sophistication 2 vs. Meeting Retirement Expenses χ 2 (2) 5 17.911, p < 0.00

Figure 6.
Percentage of
respondents confident/
General Exp 31%
very confident on 46%
meeting basic needs
and general expenses Basic Needs 46%
60%
in retirement, by
Financial 0% 10% 20% 30% 40% 50% 60% 70%
Sophistication 1
No questions correctly answered At least 1 question correctly answered

Figure 7.
Percentage of
respondents confident/
very confident on General Exp 36%
49%
meeting basic needs
and general expenses Basic Needs 51%
61%
in retirement, by
Financial 0% 10% 20% 30% 40% 50% 60% 70%
Sophistication 2
Only 1 question correctly answered At least 2 questions correctly answered
 95% CI for
Retirement
Odds odds ratio concerns and
B SE df Sig. ratio Lower Upper financial
Gender 0.207 1 0.259 0.792 0.527 1.188
literacy
0.234
Education (Degree holder) 4 0.030
Education (No formal/Up to Year 9) 0.579 1 0.188 0.467 0.150 1.451 355
0.762
Education (Pre-College) 0.405 1 0.044 0.442 0.200 0.978
0.816
Education (College/Diploma) 0.110 0.375 1 0.769 1.116 0.535 2.327
Education (Advanced/Higher National 0.328 1 0.288 0.706 0.371 1.343
Diploma) 0.349
Marital Status 0.107 0.242 1 0.659 1.113 0.692 1.788
Salary (Division 1 & 2) 3 0.063
Salary (Division 3) 0.294 1 0.897 0.962 0.540 1.714
0.038
Salary (Division 4) 0.380 1 0.531 0.788 0.374 1.659
0.238
Salary (Division 5) 1.649 0.656 1 0.012 0.192 0.053 0.696
Attend Financial Events/Seminar 0.394 0.212 1 0.063 1.484 0.978 2.250
Received Retirement Advice 0.222 1 0.170 0.737 0.477 1.140
0.305
Possess Additional Retirement Plan 0.455 0.190 1 0.017 1.576 1.086 2.288
Grouping (DBP) 2 0.001
Grouping (DCP, 45–59) 0.285 1 0.009 0.477 0.273 0.833
0.740
Grouping (DCP, 25–34) 1.135 0.306 1 0.000 0.322 0.176 0.586
Calculated Amount Needed for Retirement 1.101 0.200 1 0.000 3.006 2.032 4.446
Financial Sophistication 1 0.426 0.210 1 0.043 1.532 1.014 2.313
Financial Sophistication 2 0.231 0.298 1 0.439 1.259 0.702 2.259
Financial Sophistication 3 0.670 1 0.817 0.856 0.230 3.184
0.155
Type of Housing (Privately Owned) 2 0.669
Type of Housing (Owned by Parents/Family 0.276 1 0.987 0.995 0.580 1.708
Members) 0.005
Table IX.
Type of Housing (Rented Property) 0.253 0.307 1 0.410 1.288 0.705 2.351
Logistic regression
Constant 0.377 1 0.732 0.879 predicting likelihood of
0.129 confidence to cover
Note(s): R2 5 0.194 (Cox & Snell), 0.263 (Nagelkerke). Model χ 2 (20) 5 141.784, p < 0.01 retirement
Figures highlighted in italics signify the statistical signifiance of the variable(s) expenses (n5659)

When both regression results are compared, being able to compute the amount needed for
retirement and possessing an additional retirement plan consistently provide a measure of
confidence to meet retirement needs. This is intuitive in the sense that one would have
concerns on retirement income sufficiency unless the amount required for retirement is
approximately determined, and consequently one would be in a better position to ascertain
whether an additional retirement plan is required. To attain further insights, Sections 7.2 and
7.3 highlight the regression results of those who possess an additional retirement plan and
those who computed the amount needed for retirement, respectively.

7.2 Determinants in possessing additional retirement plan

Similar to previous regressions, being able to compute the amount needed for retirement has
the highest likelihood ratio. Table XI shows respondents who computed the amount needed
IJSSP 95% CI for
40,3/4 Odds odds ratio
B SE df Sig. ratio Lower Upper

Gender 0.170 0.198 1 0.388 1.186 0.805 1.746

Education (Degree holder) 4 0.490
Education (No formal/Up to Year 9) 0.080 0.524 1 0.879 1.083 0.388 3.028
356 Education (Pre-College) 0.391 1 0.473 0.756 0.351 1.626
0.280
Education (College/Diploma) 0.125 0.378 1 0.741 1.133 0.540 2.378
Education (Advanced/Higher National 0.327 1 0.351 0.737 0.389 1.399
Diploma) 0.305
Marital Status 0.210 0.232 1 0.366 1.234 0.783 1.944
Salary (Divisions 1 and 2) 3 0.000
Salary (Division 3) 0.298 1 0.370 0.766 0.427 1.373
0.267
Salary (Division 4) 0.372 1 0.070 0.510 0.246 1.056
0.674
Salary (Division 5) 2.427 0.582 1 0.000 0.088 0.028 0.276
Attend Financial Events/Seminar 0.208 1 0.287 0.801 0.533 1.205
0.221
Received Retirement Advice 0.216 1 0.660 0.909 0.595 1.389
0.095
Possess Additional Retirement Plan 0.680 0.186 1 0.000 1.973 1.372 2.839
Grouping (DBP) 2 0.002
Grouping (DCP, 45–59) 0.280 1 0.001 0.402 0.232 0.696
0.911
Grouping (DCP, 25–34) 0.301 1 0.002 0.400 0.222 0.722
0.916
Calculated Amount Needed for Retirement 0.715 0.200 1 0.000 2.045 1.383 3.024
Financial Sophistication 1 0.341 0.206 1 0.098 1.406 0.939 2.106
Financial Sophistication 2 0.113 0.302 1 0.707 1.120 0.620 2.023
Financial Sophistication 3 0.421 0.694 1 0.544 1.523 0.391 5.936
Type of Housing (Privately Owned) 2 0.777
Type of Housing (Owned by Parents/Family 0.265 1 0.808 0.938 0.558 1.576
Table X.
Members) 0.064
Logistic regression
predicting likelihood of Type of Housing (Rented Property) 0.155 0.301 1 0.607 1.167 0.647 2.105
confidence to meet Constant 0.774 0.541 1 0.153 2.168
basic retirement Note(s): R2 5 0.190 (Cox & Snell), 0.254 (Nagelkerke). Model χ 2 (20) 5 138.709, p < 0.01
needs (n5658) Figures highlighted in italics signify the statistical signifiance of the variable(s)

for retirement are 2.69 times more likely to have an additional retirement plan. As noted
earlier, from a retirement planning perspective, this finding is intuitive as the retirement plan
would effectively benefit from knowing how much is required upon retirement. Another
significant finding is retirement advice, whereby respondents who receive retirement advice
are 1.72 times more likely to possess an additional retirement plan.
In line with cross-tabulations results, the DCP groupings are more likely to have an
additional retirement plan; the Senior DCP and Young DCP groups are 2.13 times and 1.77
times more likely to have an additional retirement plan compared to the DBP group,
respectively.

7.3 Determinants in calculating amount needed for retirement

Table XII shows the regression results identifying those able to compute the amount needed
for retirement. There are four statistically significant variables[9]: receiving retirement
advice, attending financial events, type of housing and Ffinancial Sophistication 2.
 95% CI for
Retirement
Odds odds ratio concerns and
B SE df Sig. ratio Lower Upper financial
Gender 0.192 1 0.115 0.739 0.508 1.077
literacy
0.302
Education (Degree holder) 4 0.282
Education (No formal/Up to Year 9) 0.477 0.507 1 0.347 1.612 0.596 4.355 357
Education (Pre-College) 0.353 0.375 1 0.347 1.424 0.682 2.970
Education (College/Diploma) 0.354 1 0.558 0.813 0.406 1.625
0.207
Education (Advanced/Higher National 0.195 0.315 1 0.535 1.215 0.656 2.252
Diploma)
Marital Status 0.076 0.227 1 0.737 1.079 0.691 1.685
Salary (Divisions 1 and 2) 3 0.168
Salary (Division 3) 0.418 0.284 1 0.140 1.520 0.872 2.649
Salary (Division 4) 0.049 0.359 1 0.891 1.050 0.520 2.123
Salary (Division 5) 0.535 0.473 1 0.258 1.708 0.676 4.315
Attend Financial Events/Seminar 0.200 1 0.635 0.909 0.614 1.346
0.095
Received Retirement Advice 0.204 1 0.008 0.582 0.390 0.868
0.542
Grouping (DBP) 2 0.017
Grouping (DCP, 45–59) 0.268 1 0.005 0.470 0.278 0.795
0.754
Grouping (DCP, 25–34) 0.287 1 0.045 0.564 0.321 0.988
0.573
Calculated Amount Needed for Retirement 0.185 1 0.000 0.372 0.259 0.535
0.988
Financial Sophistication 1 0.059 0.197 1 0.763 1.061 0.721 1.562
Financial Sophistication 2 0.308 0.293 1 0.293 1.361 0.766 2.419
Financial Sophistication 3 0.227 0.662 1 0.731 1.255 0.343 4.590
Type of Housing (Privately Owned) 2 0.677
Type of Housing (Owned by Parents/Family 0.178 0.260 1 0.494 1.195 0.718 1.988
Members)
Table XI.
Type of Housing (Rented Property) 0.288 1 0.811 0.933 0.531 1.641
Logistic regression
0.069 predicting likelihood of
Constant 0.941 0.357 1 0.008 2.562 possessing additional
Note(s): R2 5 0.126 (Cox & Snell), 0.168 (Nagelkerke). Model χ 2 (19) 5 88.836, p < 0.01 retirement
Figures highlighted in italics signify the statistical signifiance of the variable(s) plans (n5660)

Amongst financial-related variables, receiving retirement advice has the highest likelihood ratio,
with respondents who received advice 2.53 times likely to compute the amount needed for
retirement, followed by those who attended financial events with a likelihood ratio of 1.78. In
addition, those who own their private residence, compared to residing in rented property, are 2.48
times more likely to be able to compute the amount required for retirement, which potentially
highlights the importance of owning one’s home prior to making further savings for retirement.
With respect to financial literacy, although Financial Sophistication 1 and Financial
Sophistication 2 are statistically significant, the former has an odds ratio that includes the value
of 1, which indicates the equal probability of computing or not computing the amount needed
for retirement. Meanwhile, the latter’s likelihood ratio stands at 0.51, which inversely indicates
those who answered at least two questions correctly are 1.95 times less likely to compute the
amount needed for retirement. This finding is puzzling and contradicts the expectation that
financial knowledge would enhance the likelihood of being able to compute the amount needed
IJSSP 95% CI for
40,3/4 Odds odds ratio
B SE df Sig. ratio Lower Upper

Gender 0.265 0.203 1 0.193 1.303 0.875 1.940

Education (Degree holder) 4 0.145
Education (No formal/Up to Year 9) 1.200 0.567 1 0.034 0.301 0.099 0.915
358 Education (Pre-College) 0.389 1 0.237 0.631 0.294 1.354
0.460
Education (College/Diploma) 0.366 1 0.998 0.999 0.488 2.047
0.001
Education (Advanced/Higher National 0.325 1 0.792 0.918 0.485 1.737
Diploma) 0.086
Marital Status 0.240 1 0.172 0.721 0.451 1.153
0.327
Salary (Divisions 1 and 2) 3 0.295
Salary (Division 3) 0.290 1 0.189 0.683 0.387 1.206
0.381
Salary (Division 4) 0.372 1 0.277 0.668 0.322 1.383
0.404
Salary (Division 5) 0.116 0.492 1 0.814 1.123 0.428 2.947
Attend Financial Events/Seminar 0.574 0.202 1 0.005 1.775 1.195 2.637
Received Retirement Advice 0.928 0.202 1 0.000 2.530 1.701 3.763
Grouping (DBP) 2 0.286
Grouping (DCP, 45–59) 0.015 0.273 1 0.955 1.015 0.595 1.732
Grouping (DCP, 25–34) 0.298 1 0.194 0.679 0.379 1.217
0.387
Financial Sophistication 1 0.358 0.201 1 0.075 1.430 0.964 2.121
Financial Sophistication 2 0.303 1 0.028 0.513 0.283 0.930
0.667
Financial Sophistication 3 0.231 0.676 1 0.733 1.259 0.335 4.733
Type of Housing (Privately Owned) 2 0.022
Type of Housing (Owned by Parents/Family 0.269 1 0.340 0.774 0.457 1.310
Members) 0.256
Type of Housing (Rented Property) 0.328 1 0.006 0.404 0.213 0.769
Table XII.
0.906
Logistic regression
predicting likelihood of Constant 0.357 1 0.239 0.657
ability to compute 0.420
amount needed for Note(s): R2 5 0.142 (Cox & Snell), 0.195 (Nagelkerke). Model χ 2 (18) 5 102.986, p < 0.01
retirement (n5671) Figures highlighted in italics signify the statistical signifiance of the variable(s)

for retirement. To understand this further, logistic regression to determine those likely to fall
under Financial Sophistication 1 and Financial Sophistication 2 is undertaken.

7.4 Determinants of those financially sophisticated

Table XIII shows the logistic regression results identifying those who fall under Financial
Sophistication 1 with two statistically significant variables being salary and grouping. Those
who correctly answered at least one question are likely to be high-income earners and likely to
fall under the Young DCP group. Meanwhile, the regression results identifying those who fall
under Financial Sophistication 2 (Table XIV) indicate education as the only statistically
significant variable. Degree holders are 3.55 times more likely to have answered at least two
questions correctly compared to respondents with pre-college qualifications.
These two regressions provide a measure of insight to the puzzling finding in Section
7.3, whereby respondents answering at least two questions correctly were less likely to
compute the amount needed for retirement. If the relatively financial literate or Retirement
sophisticated belonged in the Young DCP grouping, they are more likely focused on concerns and
attaining private home ownership before they focused significantly on retirement
planning. Although Table XIV did not indicate the Young DCP grouping as statistically
financial
significant, this could be due to the loss in statistical power, as only 13.1 per cent of total literacy
respondents are able to answer the two questions correctly, and of which 16.4 per cent
belonged to the Young DCP group as shown in Figure 8; the chi-square result [χ 2
(2) 5 7.488, p < 0.05] indicates there is a higher proportion of Young DCP respondents who 359
are able to answer two questions correctly.

8. Implications of findings
8.1 Value of private home ownership
For the relatively young, owning one’s home is an essential consideration prior to any
consideration to enhance their retirement plan. The summary profile (Section 5) indicated

95% CI for
Odds odds ratio
B SE df Sig. ratio Lower Upper

Gender 0.062 0.196 1 0.751 1.064 0.725 1.561

Education (Degree holder) 4 0.107
Education (No formal/Up to Year 9) 0.516 1 0.332 0.607 0.221 1.667
0.500
Education (Pre-College) 0.369 1 0.100 0.545 0.264 1.123
0.608
Education (College/Diploma) 0.347 1 0.379 0.737 0.373 1.455
0.305
Education (Advanced/Higher National 0.233 0.309 1 0.451 1.262 0.688 2.314
Diploma)
Marital Status 0.095 0.230 1 0.680 1.099 0.700 1.726
Salary (Division 1 & 2) 3 0.011
Salary (Division 3) 0.278 1 0.508 0.832 0.482 1.435
0.184
Salary (Division 4) 0.356 1 0.005 0.368 0.183 0.740
0.999
Salary (Division 5) 0.469 1 0.211 0.556 0.222 1.395
0.587
Attend Financial Events/Seminar 0.375 0.201 1 0.061 1.455 0.982 2.157
Received Retirement Advice 0.372 0.207 1 0.073 1.450 0.966 2.178
Possess Additional Retirement Plan 0.183 1 0.377 0.851 0.594 1.218
0.162
Grouping (DBP) 2 0.015
Grouping (DCP, 45–59) 0.344 0.276 1 0.213 1.411 0.821 2.425
Grouping (DCP, 25–34) 0.835 0.292 1 0.004 2.305 1.300 4.085
Calculated Amount Needed for Retirement 0.217 0.194 1 0.264 1.242 0.849 1.816
Type of Housing (Privately Owned) 2 0.311
Type of Housing (Owned by Parents/Family 0.265 1 0.840 0.948 0.564 1.593
Members) 0.053
Type of Housing (Rented Property) 0.303 1 0.143 0.641 0.354 1.162
Table XIII.
0.444
Logistic regression
Constant 0.353 1 0.179 0.622 predicting likelihood of
0.474 Financial
Note(s): R2 5 0.153 (Cox & Snell), 0.204 (Nagelkerke). Model χ 2 (17) 5 109.425, p < 0.01 Sophistication
Figures highlighted in italics signify the statistical signifiance of the variable(s) 1 (n5660)
IJSSP 95% CI for
40,3/4 Odds odds ratio
B SE df Sig. ratio Lower Upper

Gender 0.261 1 0.143 0.682 0.409 1.138

0.383
Education (Degree holder) 4 0.061
360 Education (No formal/Up to Year 9) 0.891 1 0.284 0.385 0.067 2.206
0.956
Education (Pre-College) 1.264 0.568 1 0.026 0.282 0.093 0.859
Education (College/Diploma) 1.014 0.534 1 0.057 0.363 0.127 1.032
Education (Advanced/Higher National 0.043 0.377 1 0.910 1.044 0.499 2.184
Diploma)
Marital Status 0.315 1 0.935 0.975 0.526 1.806
0.026
Salary (Divisions 1 and 2) 3 0.544
Salary (Division 3) 0.344 1 0.771 0.905 0.461 1.775
0.100
Salary (Division 4) 0.505 1 0.406 0.657 0.244 1.768
0.419
Salary (Division 5) 1.572 1.143 1 0.169 0.208 0.022 1.953
Attend Financial Events/Seminar 0.462 0.287 1 0.107 1.587 0.905 2.783
Received Retirement Advice 0.325 0.285 1 0.253 1.385 0.792 2.421
Possess Additional Retirement Plan 0.260 1 0.118 0.667 0.401 1.109
0.405
Grouping (DBP) 2 0.930
Grouping (DCP, 45–59) 0.114 0.426 1 0.789 1.121 0.487 2.581
Grouping (DCP, 25–34) 0.159 0.422 1 0.706 1.173 0.513 2.684
Calculated Amount Needed for Retirement 0.276 1 0.198 0.701 0.408 1.203
0.355
Type of Housing (Privately Owned) 2 0.551
Type of Housing (Owned by Parents/Family 0.092 0.362 1 0.799 1.096 0.539 2.230
Members)
Type of Housing (Rented Property) 0.468 1 0.372 0.659 0.263 1.648
Table XIV.
Logistic regression 0.418
predicting likelihood of Constant 1.200 0.487 1 0.014 0.301
financial sophistication Note(s): R 5 0.082 (Cox & Snell), 0.149 (Nagelkerke). Model χ (17) 5 56.242, p < 0.01
2 2

2 (n5660) Figures highlighted in italics signify the statistical signifiance of the variable(s)

only 17 per cent of Young DCP respondents owned their home, while the figure is closer to 80
per cent for both senior groupings. Therefore, it is not surprising that even when Young DCP
respondents are generally found to be more financial literate, as shown in the chi-square
results (Section 6.3) and to a lesser degree in the logistic regression (Section 7.4), they appear
to place more emphasis on building other assets for their near future, that is, home ownership,
more so than retirement.
The value placed on private home ownership is also in line with findings of Ak Md Hasnol
Alwee (2013) which found that younger respondents and those who undertook higher
education consider a house as the main asset to save for. They are less likely to save for
emergencies compared to home-owners, and placed a higher priority on saving to purchase a
home compared to other forms of assets.
Future research may well consider the timing of private home ownership and the extent of
retirement planning after home ownership, to shed more light into the relationship between
retirement planning, home ownership and financial literacy, notably in countries or
communities where the expectation of private home ownership is high.
 Retirement
16%
concerns and
financial
Financial Sophistication 2 9% literacy
9%

361

54%

Financial Sophistication 1 35% Figure 8.

Percentage of correct
34%
responses on Financial
Sophistication 1 and
Financial
0% 10% 20% 30% 40% 50% 60% Sophistication 2, by
grouping
DCP/TAP&SCP(Young) DCP/TAP&SCP(Senior) DBP/Pensions

8.2 Knowing how much to save for retirement

Although much research has focused on the importance of financial literacy, and
relationship between financial literacy and retirement planning, our findings indicate the
importance of knowing how much to save for retirement. This is in line with the research
by Dolls et al. (2018), whereby given information that affected their expectations of
retirement, individuals who overestimated their future pensions contributed further to
private retirement savings to realign their expectations and to ensure they have enough
funds for retirement. The same logic is applied here: if individuals knew how much they
needed to save for retirement, they are more likely to possess an additional retirement
plan, aside from their TAP and SCP.
The assumption that the default retirement schemes are largely insufficient to meet
retirement needs and that additional retirement savings are required are backed by findings.
The cross-tabulation results (Section 6.1) indicate only 1 in 5 individuals with a DCP felt their
TAP and SCP funds are sufficient to meet retirement needs. The lack of savings in Brunei is
also highlighted in Ak Md Hasnol Alwee (2013) where those in the non-government sector are
2.37 times more likely to save for retirement (excluding TAP and SCP), compared to public
sector employees. At that juncture, the Brunei government had only recently introduced the
SCP; it is therefore possible that government employees were underestimating their
retirement needs in that study compared to non-government employees and would benefit
from further retirement savings.
The implication of this finding is that policymakers should consider the value of
communication as a broad strategy, as highlighted in Weiner and Doscher (2008). More
specifically, policymakers may consider providing information and knowledge on the
amount needed for retirement, for instance, using various replacement ratios for
individuals to better gauge the amount needed for retirement, and consequently,
individuals will be in a better position to adjust their savings. Policymakers may also find
value in considering a form of mandated employer-provided financial education as
described in Fisch et al. (2019), as there is no guarantee (similar to the US context of the
401 (k) plan), that the Bruneians’ savings in the compulsory schemes (TAP and SCP) are
sufficient, and that they may find value in possessing additional retirement plans, if they
knew the amount that is needed for retirement.
IJSSP Given the empirical findings, the value of knowing how much to save for retirement is not
40,3/4 only restricted to Brunei, as the previous research in Germany indicates. In other words, the
emphasis on knowing the amount to save for retirement, and its relationship to expectations
of retirement income, should also be assessed in other countries or communities, notably
where the level of retirement planning is relatively low.

8.3 Financial advice

362 An important variable that should not be overlooked is retirement advice; this variable is
constantly found to be statistically significant in the regression results when assessing
determinants of those possessing an additional retirement plan (Section 7.2) and knowing
how much to save for retirement (Section 7.3). The relationship of retirement advice vis-
a-vis
knowing how much to save and creating an additional retirement plan is shown in Figure 9.
The prevalence and value placed on retirement advice is one step closer to ascertaining the
benefits highlighted in Lusardi and Mitchell (2011c) who noted respondents who planned for
retirement are likely to utilise formal tools such as financial experts, among others, as
opposed to talking to family/relatives or co-workers/friends. In the context of Brunei, the next
step is to enhance the quality of retirement advice. The importance on providing quality
advice cannot be underestimated, as Fisch et al. (2016) found investment decisions of
professional advisors are superior to high-literacy workplace investors, even with the latter
outperforming their peers, that is, low-literacy workplace investors.
In this study, given that financial literacy is alarmingly low for the senior groupings, there
is a need to ensure quality retirement advice is effectively provided to them. As Figure 4
(Section 6.2) highlights, only 50 per cent of Senior DCP individuals have an additional
retirement plan, and of those individuals, only about a third have it either in a written or
computer file format, and have a financial professional to help prepare for the additional plan.
This is disconcerting not only for the remaining two-thirds who may have a lower quality
additional plan, but it is also of concern for the other 50 per cent of Senior DCP individuals
who do not have an additional retirement plan.
The above impetus on providing quality retirement advice does not negate the value of
financial literacy. As noted in the literature review, financial literacy initiatives at the national
level have only surfaced in 2012 with a policy statement from the central bank, followed by
the establishment of the Financial Planning Association of Brunei Darussalam in 2016, and
National Financial Literacy Council in 2017. However, given that the relatively young
respondents in this study are found to be financially literate (Section 6.3 and 7.4), future
research may find value in investigating financial socialisation aspects including financial
literacy initiatives that took place in Brunei and whether these aspects contributed to the
relatively higher level of financial literacy amongst the young.

9. Conclusion
Given the increasing role of financial literacy in retirement research, this paper differs
from other studies by exploring the relationship between retirement concerns and

Manage retirement
Knowing how much Create Additional concern / Increase
to save Retirement Plan retirement
confidence

Figure 9.
Value of receiving Retirement Retirement
retirement advice Advice Advice
financial literacy. By assessing retirement concerns, the paper identifies significant Retirement
variables that play a role in managing such concerns, notably the value of knowing the concerns and
amount needed to save for retirement, towards creating an additional retirement plan and
consequently towards mitigating retirement concerns. Further, the prevalence of receiving
financial
retirement advice in this study pinpoints to the need for quality retirement advice to literacy
optimise retirement savings. With respect to financial literacy, the findings indicate the
relatively young respondents are more financially literate than senior groupings, but this
may not translate to retirement behaviour as their financial focus appears to link towards 363
private home ownership.
Taken as a whole, future research may consider two aspects. For the young, there is a
need to better understand the relationship between retirement planning, home ownership
and financial literacy, notably in a climate of rising home costs. The somewhat more
alarming context is for those approaching retirement in the next 10 years, as there is a
need to consider approaches to manage their retirement needs. Even after the amount
needed for their retirement is approximately known, the timing of increased investments,
if any, may be too short to yield substantial returns. Ignoring their retirement needs at
this juncture would adversely affect and place burden on welfare agencies and family
support.
Notes
1. Compound Interest: Let’s say you have 200 dollars in a savings account. The account earns 10%
interest per year. How much would you have in the account at the end of two years?
2. Lottery Division: If five people all have the winning number in the lottery and the prize is $2 million,
how much will each of them get?
3. The steps have been reduced from 11 steps to 10 steps to facilitate better understanding.
4. Firstly, it does not recognise certain expenditures may change after retirement. For instance, an
individual may pay off mortgage owed before retirement, requiring a lower retirement income.
Secondly, it assumes people will maintain the same level of lifestyle after retirement, while in reality,
the individual may spend more such as through travelling (Mittra et al., 2005). Additionally, health
and custodial expenses may increase considerably post-retirement (Hallman and Rosenbloom, 2003).
5. This question may appear basic; however, during the interviews of Ak Md Hasnol Alwee (2013),
some respondents faced significant challenges to understand the mutual fund concept, which
required the question to be amended to a simplified context.
6. Division 1 is the highest level of classification for government employees, with higher salary levels
and positions than lower divisions.
7. With regards to attending financial events, the lower and upper 95.0% confidence interval for this
ratio lies between 0.961 and 2.216. The interpretation of this variable should be noted cautiously, as
not only is it significant at the 10 per cent level but the confidence interval for the odds ratio includes
the value of 1, indicating the possibility of equal probability of being or not being confident in
meeting general retirement expenses.
8. The 95.0% confidence interval lies between 0.949 and 2.131. The interpretation of this variable
should be taken cautiously, as the confidence interval includes the value of 1.
9. Only statistically significant variables for which the confidence interval of the odds ratio does not
include the value of 1 are highlighted.

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Corresponding author
Pg Md Hasnol Alwee Pg Hj Md Salleh can be contacted at: hasnol.salleh@ubd.edu.bn

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