Factors Influencing Perceived Retirement Saving Adequacy Among Public Universities Employees in Saudi Arabia

Abstract

The ultimate aim of this research is to investigate the measurable variables that could influence employees in their perceived retirement saving adequacy. These factors comprise the employee’s capacity (basic and advanced financial literacy, financial selfefficacy), psychological (retirement goal clarity and financial risk tolerance), and economic (assets ownership and debt) factors. To carry out this task, this study employs the Capability, Willingness, and Opportunity (CWO) Model to comprehend the factors that influence retirement saving and planning behavior, which was tested on public universities employees in Saudi Arabia. The study also examines the moderating effects of culture and government policies affecting these theoretical factors given the unique Arabs culture as well as the Saudi Arabia 2030 Strategic Vision. The analysis is based on data collected via questionnaires involving 558 staff working at 29 Saudi public universities. The study employs Structural Equation Modelling-Smart-PLS (SEM-PLS) methodology to analyze the relationships among the variables. This methodology is chosen as it is the only quantitative method that can simultaneously process a complex relationship between latent variables, enabling this research to analyze more than one layer of relationships between variables under study. The research contributed significantly to the body of knowledge in relation to retirement saving adequacy by examining two theoretical models: the Life Cycle Hypothesis (LCH) and Intentional Change Theory (ICT), on individuals’ awareness of PRSA practices. LCH provides the conceptual framework to explain, analyze, and predict the interaction and relationships between planning and saving on one side and investing for retirement on the other side among individuals. Meanwhile, ICT explains how employees intentionally start changing their consumption and saving behavior before reaching retirement age. An examination through the LCH and ICT lens gives a better understanding of financial planning processes and related retirement behaviors. The study found that, directly and indirectly, capacity, psychological, and external variables influence perceived retirement saving adequacy behavior. In the Saudi context, this thesis has found that only basic financial literacy, financial self-efficacy, retirement goal clarity, and asset ownership (other asset ownership) influenced perceived retirement saving adequacy among the sample respondents. This result suggests that several variables have assisted the respondents in planning and saving for their future and saving money, particularly for their retirement. Surprisingly, this thesis has found that asset ownership (homeownership) negatively influenced perceived retirement saving adequacy. The culture was found to affect the relationship between retirement goal clarity, asset ownership (homeownership), and perceived retirement saving adequacy. Meanwhile, government policy has affected the relationship between retirement goal clarity and debt (credit card loans). The diverse effects of each variable indicate the multi-throng responsibility of government agencies or policies like the Public Pension Agency (PPA) or Vision 2030 in developing a pension system that is deemed to be in accordance with the best interests of retirees.