The rationality of retirement preservation decisions : towards a scientific model

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dc.contributor.advisor Van Schalkwyk, Cornelis Hendrik
dc.contributor.coadvisor Gouws, Daan G.
dc.contributor.other D14/4/519/tm
dc.contributor.postgraduate Reyers, Michelle
dc.date.accessioned 2014-06-17T12:58:46Z
dc.date.available 2014-06-17T12:58:46Z
dc.date.created 2014-04-10
dc.date.issued 2014 en_US
dc.description Thesis (PhD)--University of Pretoria, 2014. en_US
dc.description.abstract There is worldwide concern that individuals are not saving sufficiently for retirement. Low savings rates, coupled with a lack of preservation of retirement funds when individuals move jobs, could have adverse repercussions on the ability to retire with sufficient funds. The traditional response to low preservation levels has been to impose taxes on cash withdrawals and a move is underway in South Africa to potentially mandate preservation. All these interventions assume that individuals are not acting rationally when they take a cash payout, however this assumption of irrationality has not been tested. Therefore, the aim of this study was to determine the factors that lead to low preservation levels in order to determine whether intervention is required to increase preservation, and if so, what form it should take. The study consisted of two phases. Phase one carried out a critical, multidisciplinary literature review to construct a conceptual model of the factors which potentially lead to low preservation levels. According to this model, these factors could arise from rational decision making in line with consumption smoothing behaviour linked to the life cycle hypothesis or irrational decision making arising from behavioural factors linked to bounded willpower or bounded rationality. The resultant model highlighted the distinct differences in the drivers of rational and irrational behaviour and therefore, the distinctly different interventions required. Phase two of the study focused on the empirical testing of the conceptual model to obtain an understanding of the relative importance of the factors. This phase made use of an analytical survey to test relationships between the predictor variables identified in the conceptual model, and the outcome variable which is whether the individual preserved funds when moving jobs. The data was analysed with logistic regression techniques. The study found that behavioural factors play an important role in explaining the preservation decisions made by individuals. In particular behavioural factors related to bounded rationality as a result of the inherent computational complexity of the decision making environment emerged as important explanatory variables. This appears to indicate that solutions should focus on decision support and guidance to assist individuals in making optimal decisions. This study makes a unique contribution to the field of retirement finance and decision making as it highlights the role that behavioural factors play in retirement preservation decisions. The implications regarding which interventions are best suited to assist in optimal decision iv making are informative for policy makers, providers of retirement products and financial advisors, as well as sponsors and members of retirement funds.
dc.description.availability Unrestricted en_US
dc.description.department Financial Management en_US
dc.description.librarian lk2014 en_US
dc.identifier.citation Reyers, M 2014, The rationality of retirement preservation decisions : towards a scientific model, PhD thesis, University of Pretoria, Pretoria, viewed yymmdd <http://hdl.handle.net/2263/40189> en_US
dc.identifier.uri http://hdl.handle.net/2263/40189
dc.language.iso en en_US
dc.publisher University of Pretoria en_ZA
dc.rights © 2013 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. en_US
dc.subject Retirement preservation decisions en_US
dc.subject Rationality of retirement preservation en_US
dc.subject Towards a scientific model en_US
dc.subject Retirement decision making
dc.subject Life-cycle hypothesis
dc.subject UCTD en_US
dc.title The rationality of retirement preservation decisions : towards a scientific model en_US
dc.type Thesis en_US


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