Determinants of Investment Decisions among Pensioners at Kabarak University, Kenya

Abstract

Pensions funds are the principal sources of retirement income for millions of people in the world. The need for re-investing one's retirement savings to improve the level of income of pensioners is an important issue facing the contemporary society more so among retirees without a sound investment plan or financial literacy to back their investment activities. This study thus, sought to assess the determinants of investment decisions for pensioners in institutions of higher learning in Kenya. The objectives of the study were; to determine how income levels influence investment decisions by pensioners in institutions of higher learning; to investigate how financial literacy influences investment decisions by pensioners in institutions of higher learning; to establish how retirement age influences investment decisions made by pensioners in institutions of higher learning. The study was based on three major theories; life cycle savings theory, The Bequest theory and Precautionary Motives Theory. The study used a descriptive research design with a target population of 302 pensioners. The study used stratified sampling technique to select a representative sample of 76 pensioners. A census collected all information about every member of the sample population. The actual research data was then collected, cleaned and then analyzed using SPSS version 20. The study conducted both a descriptive analysis and an inferential analysis to explain the relationships between the independent variables and the dependent variable. A Pearson correlation analysis was done to show the relationships between the variables and the findings presented in tables. There was a statistically significant strong positive correlation between financial literacy of .299 (p = 0.07˂ 0.01) and investment decisions by pensioner in Kabarak University. The study found statistically significant weak positive correlation coefficient between Investment opportunities of .043 ( p = .366˂ 0.01) and investment decisions by pensioner in Kabarak University. The study concludes that investment decisions have influenced investments made by pensioners at Kabarak University. The study recommended that it is necessary to undertake savings and investments in projects that present better returns with guarantee for payoffs. It was recommended that further studies should be done so as to assess implications of these determinants on the effectiveness of the choice of investment decisions made by the pensioners.