The Role of Pension Knowledge in Voluntary Pension and Banking Savings in Chile

2021. Academia Revista Latinoamericana de Administraci?n. Vol. 34 No. 4, pp. 545-560. https://doi.org/10.1108/ARLA-12-2020-0264

David Díaz S, Pablo Tapia G, Jose Ruiz V

Abstract:

Purpose: In an era of increasing financial vulnerability, people are not saving enough to either fund their future pension benefits or having precautionary savings. We propose that pension knowledge makes people increase their probability of having voluntary pension and banking savings. Methodology: We use the Social Protection Survey in Chile, a unique set of panel data for affiliates in 2006 and 2009. Firstly, we use clustering algorithms to find naturally occurring groupings in the level of pension knowledge. Secondly, we run a probit regression model for explaining the probability of having a voluntary pension and banking savings, using as determinants the level of pension knowledge and several control variables. Findings: We find two clusters of pension knowledge in the Chilean pension system. In addition, we find that there is a positive correlation between high pension knowledge and having voluntary  savings. Practical implications: As people who spend time planning accumulate more wealth, it is important to develop public policies that promote the advantages to know better about the benefits of having voluntary savings for the long-term horizon. Social implications: Policy programs to increase to be responsible can have positive effects on society’s welfare. Originality: This is the first study that connects clustering algorithms for pension knowledge, and their implications in financial making decisions.

Palabras claves: Pension knowledge, risk, multi-funds, pension funds, and voluntary savings.

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