THE evolution and development of financial
markets has significantly increased the opportunities for consumers, investors
and workers to invest into a multitude of financial products. The increasing
complexity provides heavy demands on participants in financial markets to make
rational and sensible investment choices. Financial and education literacy
programs have an important role to play in assisting individuals to make more
appropriate short and long term saving decisions.
In Tanzania, the retirement age pension, is
contributed both by employer and employee and not from government taxes, and
therefore forms the basis of Tanzania?fs retirement income system, however, given
the reality of an ageing population and increasing an access to pension
contribution withdrawals has compelled the Social Security Regulatory Authority
(SSRA) to undertake a number of measures to shift the responsibility for saving
to the individual, forcing insured members to accept an increasing level of
responsibility for their financial and pension decision-making.
In the light of the changing retirement
environment, it would be expected that Tanzanians?f would ensure that they become financially
and pension literate, however, despite the amount of information and advice
available in the public pension market place, this is not the case, and they do
not appear to be appropriately prepared for their retirement.
One of the areas in which an increased level
of financial and pension literacy would be of major benefit to individuals is
in the area of retirement planning. Many Tanzanians are concerned about their
retirement and their lifestyle in retirement. Whilst financial and pension
concerns are only one dimension to this problem they are nonetheless a
significant contributor to this concern, and one in which prudent planning and
investment can make a difference.
Concern about not having adequate income in
retirement is still not great a deal to
common Mwanachi, because, when the aged pension was introduced for 60-year olds
in Tanzania in the early 1990s the average life expectancy was considerably
less than 50, that is, the average person was expected to die before funding a
retirement became a concern, however life expectancy has increased
dramatically.
Given the increasing emphasis for
individuals to become more responsible for managing their own retirement
funding, and the shifting demographics resulting in an increasing proportion of
Australia?fs population entering their retirement
preparation stage, there is likely to be greater need over time for individuals
to be able to make informed decisions concerning their retirement planning,
with financial literacy been widely promoted as assisting individuals in this
process, and to recognize the importance of knowledge in enhancing their
retirement planning decision making.
It is important to note that financial
literacy is concerned with both knowledge and the ability to interpret
information and translate lessons learned into changing patterns of behaviour.
Many Tanzanians possess a poor knowledge about personal financial and pension
management. People or beneficiaries are generally making poor decisions about
the use and management of their personal finances. Majority of them believe
that preparing for retirement is not important, and they have not prepared for
retirement and that their savings plans are insufficient.
All countries are grappling with the issue
of determining the preferred approach for fostering financial literacy within
the general community. Given that individuals are a heterogeneous group, the
extent and degree of financial literacy among the community will depend on a
range of personal circumstances economic, psychological, sociological and
biological factors. Given this wide range of factors, educators are starting to
realize that providing an effective financial literacy program is not just
about providing education in a one-size fits all approach. To be effective,
behaviour strategies designed for specific audiences and targeted at the
individual learner?fs stage of life must be an integral part of
any financial literacy program. One of the important issues which has been
largely unexplored is the extent to which attitudes and behaviours developed
over a lifetime are able to be significantly changed by attending education
program(s).
The challenge facing Tanzania public pension
schemes is the need to show the extent to which the financial and pension
education programs have changed attitudes and investment behavior of their
insured members. The extent to which financial and pension education programs
provide lasting effects in changing behaviour was found to be inconclusive. On
the other hand, a body of research indicates that delivering financial literacy
programs within the workforce is particularly effective
Many public pension funds have not shown seriousness on
accepting responsibility for improving the financial and pension literacy of
their members so as to increase retirement savings and educate members on the
ramifications of adopting differing investment approaches. The forum for these
financial literacy programs can vary considerably, ranging from simply
providing members with education literature through to conducting comprehensive
seminars and workshops tailored to differing audiences. Public pension funds
can partner with other organizations and institutions to deliver financial and
pension education such as social security regulatory authority (SSRA).
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