Financial literacy and behavioural disposition in retirement saving – A study on employee’s preparedness for a fully defined contribution pension scheme in Malaysia

Abstract

This paper provides vital results on employee’s preparedness towards government proposal in substituting the traditional pension system for a fully Defined Contribution Retirement scheme. By offering a distinct financial literacy measurement index and extending the Theory of Planned Behaviour analysis, this study found that individuals with higher financial literacy, alongside positive behavioural, normative, and controlled beliefs are more likely to have informed financial decision particularly in retirement savings. Thus, the government and various stakeholders should intensify an advanced financial educational programme, as well as establish more appropriate retirement schemes to increase employee’s financial adequacy and pension benefits.