An analysis of intention to invest in a retirement annuity fund at a South African University of Technology.

Abstract

The significance of saving for retirement cannot be overstated. Governments worldwide are worried about the increasing number of older people who have become dependent on the government and over-stretched public finances. Advancements in medical technology and adopting better lifestyles are projected to increase life expectancy for individuals in South Africa and globally. This will result in many individuals exhausting their retirement funds, rendering them unable to retire or necessitating considerable adjustments to their living standards. This study analyses the factors influencing an individual’s intention to invest in a Retirement Annuity Fund (RAF), which provides significant tax benefits to contributors. The study employed a quantitative methodology, and the sample was chosen using a simple random sampling procedure. It consisted of 300 academic and support staff employed at a South African University of Technology with an annual income ranging from R1 to R625 992. The data was gathered through a web-based questionnaire created using Google Forms and shared with participants by email. The data were utilised to construct a multinomial logistic regression model to examine the investment intentions of the participants and identify influential factors. Most participants had sufficient basic financial literacy skills necessary to make investment decisions. The study found that the marketing efforts of RAF providers, concern for financial well-being, financial planning, awareness, and knowledge about tax benefits offered by RAFs did not influence an individual’s intention to invest in RAFs. However, it found that financial literacy, social influence, and a positive attitude towards RAFs influenced the intention to invest in RAFs. The study contributes to the existing literature by providing insights into factors influencing investment intentions towards RAFs. The fact that the tax benefits for contributors did not impact an individual’s intention to invest in RAFs is concerning. The government must increase efforts to educate low and middle-income earners on its tax reforms, ensure that tax reforms are aligned to achieve their intended goals and improve individuals’ understanding of retirement tax benefits. The findings will guide the National Treasury and RAF providers to enhance awareness about the advantages of investing in an RAF. This will aid in reducing the burden on welfare systems and generate capital that can be invested in the economy.