Paul Gerrans

Gender differences in retirement savings decisions

As members of the Australian workforce approach retirement, they are being presented with increased choice in their superannuation investments. With increased choice has come greater personal responsibility for ensuring adequate retirement savings. This paper explores gender differences in superannuation investment choices through a range of interactions with individual demographics and in doing so a gender effect can be further refined than previous research has identified. The data for this paper comes from a survey of members of the Superannuation Scheme for Australian Universities (SSAU).

Retirement Savings Investment Choices in Response to the Global Financial Crisis: Australian Evidence

This paper examines the retirement savings investment choices of Australian workers over a three-year period, including the global financial crisis (GFC), based on a large sample of members drawn from five superannuation funds. The overwhelming majority of members did not change their investment strategy in response to the GFC. Between October 2006 and March 2009 less than seven per cent of members did so. The likelihood of making a change increased with member balance and contributions levels. During the GFC period women with large balances were more likely to make a change, a result which contrasts with the bulk of prior evidence suggesting males as the more active. The level of change activity did increase during the GFC peaking in October 2008, the month with the largest market downturn, and March 2009, when the market reached its low point. The implications for both members and funds of the observed investment choice behaviour are discussed.

Consultation and resource usage in retirement savings decisions: Australian evidence of systematic gender differences

Abstract Australian retirement savings funds are growing rapidly and fund members are assuming greater responsibility for their own savings. Individuals’ retirement savings decision processes have not been extensively researched, however, these decisions are significant not only for members but also for employers and government. This paper provides information on retirement savings in Australia and reports on a survey of members of a University superannuation fund who were recently asked to choose between a defined benefit scheme or one of four investment accumulation accounts. We explore gender differences in knowledge of superannuation and those consulted in making the decision.

Active and Adjusted: Investigating the Contribution of Leisure, Health and Psychosocial Factors to Retirement Adjustment

Engagement in leisure activities during retirement and its relationship to retirement adjustment were investigated. Psychosocial mediators included mastery, self-efficacy for retirement (SE-R) and activities (SE-A), positive (PA) and negative affect (NA). Resources investigated included physical health and finances. Leisure activities examined were social, home entertainment, chores, light exercise, vigorous exercise, and education. Data were gathered from a sample consisting of 243 retirees. Direct predictors of retirement adjustment included finances, health, mastery, SE-R and SE-A. Social activities were the best predictor of a wide range of positive outcomes, including PA, mastery, SE-R and SE-A. Educational activities improved SE-R. Being involved in a broader range of activities was associated with PA, mastery and SE-A. Familiarity and enjoyment of activities were implicated in the maintenance and continuation of activities at post-retirement. Research findings have implications for aged-care and other retirement service providers, as well as for individuals.

Australian Managed Fund Ratings and Individual Investors

This paper examines the use and understanding of managed fund ratings in Australia. A survey of individual retail investors suggests information source and selection criteria constructs are more useful in explaining the role of ratings than an approach based solely on expectations of return and risk. There does not appear to be discrimination in the use of rating providers by investors. Reliance on a particular rating is not significantly related to what investors consider the purpose of the rating to be, or the importance they place on rating inputs. Competing rating providers have more explaining to do.

Asset Allocation and Age Effects in Retirement Savings Choices

We examine the asset allocation decisions of members of three large Australian retirement savings funds. Superannuation Guarantee legislation in 1992 made Australian employees compulsory investors by requiring employers to contribute a fixed proportion of earnings to a superannuation fund on behalf of employees. A majority of these employees can choose an investment strategy for these contributions. We examine how actual investment strategy and asset allocation choices of members change with age in view of the conventional wisdom that individuals allocate less to risky assets as they age and investments theory which provides conflicting advice on the issue.

Pension plan participant choice : Evidence on defined benefit and defined contribution preferences*

We report analysis of voluntary switching from defined benefit (DB) to defined contribution (DC) plans in an environment best characterised as benign. Using a large Australian fund database we identify socio-demographic correlates and the macroeconomic circumstances associated with DB to DC switching. The age of participants is an important correlate of switching behaviour, suggesting a degree of risk tolerance previously not recognised in the literature. It is also noted, however, that this type of switching behaviour may involve secondary behaviour such that uncertainties of DC investment performance are managed by reference to an asset allocation formula that maps to the previous DB investment strategy.

Financial literacy, financial judgement, and retirement self-efficacy of older trustees of self-managed superannuation funds

We investigate relationships between retirement self-efficacy, financial literacy and financial judgement across a sample of older trustees of self-managed superannuation funds (SMSFs). Aside from demographic factors, we explore self-rated dementia behaviours, general mental ability, mastery and risk tolerance. An increasing number of older people are controlling significant assets, particularly those who elect to become self-managed superannuation fund trustees. The ageing population, including self-managed superannuation fund trustees, is susceptible to cognitive decline with advancing age. We find that cognitive ability and self-rated behavioural dementia symptoms both relate to financial literacy. Variance in retirement self-efficacy was explained by age, cognitive ability, financial literacy, mastery and self-rated behavioural dementia symptoms. Those reporting dementia symptoms appear more vulnerable to making poor financial judgements. Findings have important implications for financial literacy interventions and the monitoring of on-going cognitive decline.

Injunctive Social Norms Primacy Over Descriptive Social Norms in Retirement Savings Decisions

Consistent with the global trend to shift responsibility for retirement income provision from the public purse to individuals has been encouragement to save more and to manage investment strategy. Analyzing data from 2,300 respondents to a randomly distributed questionnaire, this article focuses on the motivational importance of social norms. The study finds injunctive social norms (what is commonly approved or disapproved of) exert greater influence than descriptive social norms (what is commonly done) in predicting retirement savings intentions. Modeling employs the theory of planned behavior, and also finds injunctive social norm has predictive primacy over attitude and perceived behavioral control. Discussion advocates a balanced approach to intervention design, and identifies opportunities for the further study of normative message framing.

Mutual fund selection criteria: evidence from Malaysia

Purpose - Under its “Members Investment Scheme” strategic initiative, the Malaysian Employees Provident Fund (EPF) permits its members to invest part of their retirement savings in approved external funds. Given there is an increasing number of unit trust funds available in the market, it is not an easy task for members to make this investment choice decision. The purpose of this paper is to explore the perceived importance of fund selection criteria within the context of retirement savings in Malaysia. In addition, it also seeks to examine whether there is a relationship between religious affiliation and choice of fund. Design/methodology/approach - A questionnaire-survey was carried out among 440 individual EPF members. Findings - The survey results show that the ranking of mutual fund selection criteria differs between Muslim and non-Muslim members. Past performance was the most important criterion valued by the non-Muslim EPF members. In line with conforming to religious belief, the funds commitment to Islamic principles was the most important criterion considered by Muslim EPF members. Both type of religious group members also considered the overall reputation of the fund as important criterion in selecting a mutual fund. Research limitations/implications - The paper is subject to the normal limitations associated with survey research. Practical implications - The findings of this study can help fund management companies to better promote their funds to the right investors. Originality/value - The paper provides empirical evidence regarding mutual fund selection criteria from the perspectives of individual investors.