The Mediating Effects of Financial Sophistication on the Relationship Between Financial Literacy and Perceived Retirement Saving Adequacy among University Public Employees in Kenya

  • Sheila Jepkorir Arusei Department of Accounting and Finance, School of Business and Economics, Moi University, P.O Box 3900-30100 Eldoret
  • Josephat Cheboi Department of Accounting and Finance, School of Business and Economics, Moi University, P.O Box 3900-30100 Eldoret
  • Ronald Bonuke Department of Marketing and Logistics, School of Business and Economics, Moi University, P.O Box 3900-30100 Eldoret
Keywords: Financial sophistication, Government, financial literacy, perceived retirement saving adequacy, Public University Employees


Sustaining adequate retirement savings has received increased attention as a result of ageing population across the globe and an increase in retirement poverty. According to Retirement Benefits Authority only 21% of the working population is part of pension schemes. Perceived retirement saving adequacy is a measure of whether current retirement savings are adequate for a comfortable retirement and should be classified as priority in ensuring financial security at old age. Several studies show an increase in post-retirement poverty which is occasioned by lack of preparedness over one’s active work life. Financial literacy has been singled out as a major determinant of perceived retirement saving adequacy however the results are inconclusive. Furthermore, studies indicate that financially sophisticated workers tend to make more rational financial decisions. The objective of this study is to determine the mediating effects of financial sophistication on the relationship between financial literacy and perceived retirement saving adequacy among University Public Employees in Kenya. The study was guided by Victor Vroom’s Expectancy Theory of Motivation. The study adopted explanatory research design and was anchored on a positivist paradigm. The study used primary data from public university employees within Nairobi Metropolitan area in Kenya. Questionnaires were used to collect data. The research targeted 17,320 employees and a sample of 390 was selected. Stratified systematic random sampling was used to arrive at the respondents. Multiple regressions were used and Sobel’s test was used after which bootstrap test of the indirect effect was carried out.  Results showed a positive relationship between FL and PRSA (β=.664, p<000), FL and FS (β=.8064, p<.000). Further, financial sophisticated mediated the link between financial literacy and retirement savings adequacy (β=.554) was significant. Based on the findings, financial literacy, financial sophistications have a significant effect on perceived retirement savings adequacy among public university employees in Kenya. The findings of the study suggest that financial literacy and sophistication should be intensified by both Government institutions and private investors to improve knowledge and skills on financial matters. The findings of the study will also help the government in transforming pension sector by making notable improvements in turn will improve savings culture.


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How to Cite
Arusei, S., Cheboi, J., & Bonuke, R. (2023, May 18). The Mediating Effects of Financial Sophistication on the Relationship Between Financial Literacy and Perceived Retirement Saving Adequacy among University Public Employees in Kenya. African Journal of Education,Science and Technology, 7(3), Pg 953-966.