FINANCIAL PARAMETERS INFLUENCING UPTAKE OF VOLUNTARY DEFINED CONTRIBUTION PENSION INVESTMENTS AMONG PUBLIC SERVANTS IN MURANG'A COUNTY GOVERNMENT, KENYA
Anne Nyambura Macharia - Master of Science Finance Student, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
Dr. Farida Abdul (PhD) - Lecturer, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
Dr. Grace Kariuki (PhD) - Lecturer, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Voluntary defined contribution pension investment is central to achieving old-age personal financial stability, yet LAPFUND reports low participation among Kenyan civil servants, characterized by a 45% take-up rate. This study investigated the financial parameters influencing the uptake of voluntary pension investments among public servants in the Murang’a County Government, Kenya. Grounded in behavioral finance theory, the capital asset pricing model, socioemotional selectivity theory, and the theory of planned behavior, the research examined the effects of financial literacy, investment expenses, anticipated returns, and personal risk tolerance on pension participation, alongside the moderating role of age. Utilizing a purposive and stratified random sampling design, data were collected via semi-structured questionnaires from 350 active and retired employees. Descriptive and inferential analyses were conducted using SPSS, with diagnostic tests confirming normality, linearity, homoskedasticity, and the absence of multicollinearity. The multiple regression model was highly significant (R=0.770, R2=0.593, F(8,341)=62.05, p<0.001), demonstrating that financial parameters and demographic interactions collectively account for 59.3% of the variance in pension uptake. Correlation analysis revealed that financial literacy (r=0.377), anticipated returns (r=0.434), and risk tolerance (r=0.549) positively influence participation, while investment costs (r=−0.396) exert a significant negative effect. Furthermore, age significantly moderated these relationships (p<0.001). The study concludes that enhancing employee financial literacy, reducing fee structures, transparently communicating returns, and offering risk-aligned pension options are critical to accelerating uptake. Consequently, it recommends demographic-targeted financial education, low-cost pension designs, and strategic, age-sensitive outreach to optimize retirement security among public servants.