Financial Literacy and Retirement Planning in View of a Growing Youth Demographic: The Russian Case

by Leora Klapper and Georgios A. Panos; CeRP WP N. 114/11

The paper has been realized for the Netspar Theme grant project  Financial Literacy: Evidence and Implications for Retirement Planning, Saving Behavior, and Financial Education Programs”, and presented at the CeRP workshop “Financial Literacy around the World” (FLat World) (Collegio Carlo Alberto, 20-21 December 2010).


Our study contributes to the financial literacy literature by examining its association with retirement planning in an interesting and novel context, i.e. that of a country with a relatively old and rapidly ageing population, large regional disparities and a rapidly emerging financial market. Even though consumer borrowing is increasing very rapidly in Russia, we find that only 36.3% of respondents in our sample know about the working of interest compounding and only half can answer a simple question about inflation. In a country with pervasive public pension provision, we find that financial literacy is significantly and positively related to retirement planning using private pension funds and schemes. Residents in rural areas are much more reliant on the public provision and invest less in private schemes and savings. The results of our study have a clear policy implication; along with encouraging the availability of private retirement plans and financial products, efforts to improve financial literacy can be pivotal to the expansion in the use of such schemes.


Published: March 2011

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