Abstract

1. LITERATURE
Individual pension companies are one of the important institutional investors of the financial system and make a significant contribution to the development of the financial system with the long-term investment perspective. The limited number of studies have been conducted on the factors affecting the participation of the persons to the individual pension system. The relevant literature has revealed that financial literacy level positively affects the participation of the persons to the individual pension system.


1.1. RESEARCH SUBJECT
The research subject is the effect of financial literacy and demographic characteristics on the participation of the persons to the individual pension in the sample of Usak University staff.


1.2. RESEARCH PURPOSE AND IMPORTANCE
The research purpose is to analyze the effect of the financial literacy level and demographic characteristics of persons to the participation to the individual pension system. The determination of factors having effect on the individual pension system’s participation is important for determination of the right policies to raise the size of the private pensions system considering the roles of pension funds in the financial system.


1.3. CONTRIBUTION of the ARTICLE to the LITERATURE
The limited number of studies have investigated the impact of financial literacy on participation to the individual pension system. Furthermore, this study is one of the early studies researching the impact of financial literacy on individual pensions system’s participation for a sample in Turkey.


2. DESIGN AND METHOD
The effect of the financial literacy level and demographic characteristics on the participation of the persons to the individual pension system was investigated through factor analysis and logistic regression analysis.


2.1. RESEARCH TYPE
The quantitative research was conducted to examine the effect of financial literacy and demographic characteristics on the persons’ participation to the individual pension system.


2.2. RESEARCH PROBLEMS
The effect of basic, medium and advanced level financial literacy levels together with demographic characteristics on participation to the individual pension system were analyzed.


2.3. DATA COLLECTION METHOD
The data set was obtained through questionnaire method.


2.4. QUANTITATIVE / QUALITATIVE ANALYSIS
The factor analysis and logistic regression analysis were conducted in the context of quantitative analysis.


2.5. RESEARCH MODEL
The effect of financial literacy level and demographic characteristics on the participation to the individual pension system was analyzed by the following model.


 


BESUYE: Participation to the individual pension system CINS: Gender
YAS: Age EGTM: Education level
CALSURE: Employment period
FINSURE: Financial market experience
TFOY: Basic financial literacy level
OFOY: Medium financial literacy level
IFOY: Advanced financial literacy level



2.6. RESEARCH HYPOTHESES
The effect of basic, medium, and advanced financial literacy level together with demographic characteristics on the participation to the individual pension system was researched.



3. RESULTS AND DISCUSSION
The empirical analysis revealed that individuals’ basic financial literacy levels were quite high and that the ratio of correct responses to the basic financial literacy questions was 88%. The ratio of correct responses to the medium level financial literacy questions was found as 41.3 %. The ratio of correct response to the advanced financial literacy questions was found as 38.4%. The logistic regression analysis disclosed that only advanced financial literacy level negatively affected the participation of the persons to the individual pension system. Furthermore, the men’s participation to the individual pension system was higher, age negatively affected the participation to the individual pension system and employment term positively affected the participation to the individual pension system.



3.1. FINDINGS as a RESULT of ANALYSIS
The participants’ basic financial literacy level was quite high, but their medium and advanced financial literacy level was relatively low. Furthermore, basic and medium financial literacy level had no significant impacts on the participation to the individual pension system and advance financial literacy level negatively affected the participation of the persons to the individual pension system.



3.2. HYPOTHESIS TEST RESULTS
The logistic regression analysis revealed that gender, age, employment term and advanced level financial literacy had a significant effect on the participation to the individual pension system. But education level, financial markets experience, basic and medium financial literacy levels had no significant effects on the participation to the individual pension system.



3.3. DISCUSSING the FINDINGS with the LITERATURE
The impact of various financial literacy levels on the participation to the individual pension system contradicted with the related literature. The insignificant impact of basic and medium financial literacy level and the negative impact of advanced financial literacy level on the participation to the individual pension system could have resulted from sample specific characteristics.


 


 


4. CONCLUSION, RECOMMENDATION AND LIMITATIONS


4.1. RESULTS of the ARTICLE
The empirical analysis revealed that basic and medium financial literacy levels were not significant determinants of participation to the individual pension system. However, advances financial literacy level negatively affected the participation to the individual pension system. Furthermore, demographic variable of age had a negative impact, but men had a positive impact on the participation to the individual pension system. Also, employment term positively affected the participation to the individual pension system.


4.2. SUGGESTIONS BASED on the RESULTS


The findings of the study revealed that advanced financial literacy level negatively affected the participation to the individual pension system. This may be resulted from the fact that the individual retirement system does not provide adequate return. Therefore, use of different fiscal incentives to raise the participation to the individual pension system in Turkey might be beneficial considering the findings of the study.



4.3. LIMITATIONS of the ARTICLE


The study sample consisting of Usak University personnel is the limitation of the study.