Retirement Planning Decisions: Analyzing Behavioral Influences on Pension Scheme Selection in Malaysian Statutory Bodies
Abstract
Since gaining independence in 1957, Malaysia has classified employees in various public services as civil servants. Statutory bodies and local authorities were later established to provide specific public services, and their employees were placed under the Employees Provident Fund (EPF) contribution scheme instead of the government pension scheme due to the lack of constitutional amendments. Following the Harun Salary Commission’s recommendations in 1975, these employees were given the choice between the pension scheme and the EPF scheme, with most opting for the pension scheme. This preference has placed significant financial strain on the government's pension resources. To alleviate this burden, current efforts aim to encourage government servants to choose the EPF scheme and consider placing future recruits under this scheme. This study aims to identify the factors influencing statutory bodies and local authority employees to opt for the government pension scheme despite the availability of the EPF scheme. Utilizing the Life-Cycle Theory to understand general savings behavior and the Theory of Planned Behavior to examine decision-making processes, a quantitative approach was employed. Data were collected via a questionnaire survey with 176 respondents from statutory bodies and local authorities in Kota Kinabalu. The PLS-SEM model was used to analyze the data, testing validity and reliability against Common Method Bias. The results indicated that Subjective Norms and Perceived Behavioral Control positively influenced the choice of retirement scheme, while Attitude did not. These findings highlight the role of social influences and perceived control in retirement decision-making.
Downloads
References
Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(2), 179–211. https://doi.org/10.1016/0749-5978(91)90020-t
Amorim, S. M., & de Freitas Pinho França, L. H. (2020). Health, financial and social resources as mediators to the relationship between planning and satisfaction in retirement. Current Psychology, 41(6), 3510–3524. https://doi.org/10.1007/s12144-020-00836-8
Chek, M. Z. A., & Ismail, I. (2023). Retirement Planning Issues, Problems, and Opportunities in Malaysia. International Journal of Research and Innovation in Social Science (IJRISS), 7(9), 1926-1932. https://doi.org/10.47772/IJRISS.2023.71055
Folk, J. Y., Beh, L. S., & Baranovich, D.-L. (2012, July 23). Financial education: Determinant of retirement planning in Malaysia. Journal of Business Management and Economics, 3(2), 069-078.
Hasnah Haron, Nat Razali N.N.S & Mohamad F., 2019, Factors Influencing Financial Planning Retirement Amongst Employees in the Private Sector in East Coast Malaysia: Literature Review and Research Agenda. FGIC 2nd Conference on and Integrity, KnE Social Sciences, pp. 1115-1129. (doi:10.18502/kss.v3i22.5115)
Hassan, M. K., & Lawrence, S. (2007). Financial Preparation for Retirement: Factors Affecting Retirement Preparation Through Employer Sponsored Retirement Plans. https://doi.org/10.2139/SSRN.985671
Hofstede Insights. (2021). Country comparison tool: Malaysia. Retrieved from https://www.hofstede-insights.com/country-comparison-tool?countries=malaysia
https://econpapers.repec.org/article/etrseries/v_3a3_3ay_3a2012_3ai_3a2_3ap_3a069-078.htm
Kamal Halili Hassan, Rohani Abdul Rahim, Fariza Ahmad, Tengku Nor Azura, Rooshida Rahim Mericam, & Siti Kohlijah Bahari, 2016, Retirement Planning Behaviour of Working Individuals and Legal Propositionfor New Pension Systems in Malaysia. Journal of Politics and Law, 9(4), 43-52. (doi:10.5539/jpl.v9n4p43)
Lusardi, A., & Mitchell, O. S. (2011). Financial literacy around the world: An overview (Working Paper No. 17107). National Bureau of Economic Research. http://www.nber.org/papers/w17107
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5–44. https://doi.org/10.1257/jel.52.1.5
Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In Kenneth K. Kurihara, ed., Post Keynesian Economics (pp. 388–436). essay, Rutgers University Press.
Mustafa, W. M. W., & Islam, M. A. (2021). Financial retirement planning among self-employed workers in Malaysia: A conceptual investigation. AIP Conference Proceedings, 2339(1), 020145. https://doi.org/10.1063/5.0045147
Sabri M. F., & MacDonald M. (2010). Savings behavior and financial problems among college students: The role of financial literacy in Malaysia. Cross-Cultural Communication, 6(3), 103-110. https://www.researchgate.net/publication/ 50946039
Selvadurai, V., Kenayathulla, H. B., & Siraj, S. (2018). Financial Literacy Education and Retirement Planning in Malaysia. Malaysian Online Journal of Educational Management (MOJEM), 6(2), 41-66. Retrieved from https://doi.org/10.22452/mojem.vol6no2.3
Tan P. H., Ting H., & Mong S. K. (2019). Income inequality and retirement savings in Malaysia. Journal of Financial Counseling and Planning, 30(2), 242-257. https://www.researchgate.net/publication/281269248
Yuan, J., Chong, K. M., Hii, I. S. H., & Li, H. L. (2023). Retirement Planning among Female Workforce in Malaysia and China. Journal of ASIAN Behavioural Studies, 8(26), 57–77. https://doi.org/10.21834/jabs.v8i26.437
