Abstract

Purpose In an era of increasing financial vulnerability, people are not saving enough to either fund their future pension benefits or having precautionary savings. The authors propose that pension knowledge makes people increase their probability of having voluntary pension and banking savings. Design/methodology/approach The authors use the social protection survey in Chile, a unique set of panel data for affiliates in 2006 and 2009. First, the authors use clustering algorithms to find naturally occurring groupings in the level of pension knowledge. Second, the authors run a probit regression model for explaining the probability of having a voluntary pension and banking savings, using as determinants the level of pension knowledge and several control variables that are usually explored in the literature. Findings The authors find two clusters of pension knowledge in the Chilean pension system. In addition, the authors find that there is a positive correlation between high pension knowledge and good financial decision-making, as these people have voluntary retirement and banking savings. Practical implications As people who spend time planning accumulate more wealth, it is important to develop public policies that promote the advantages to know better about the benefits of having voluntary savings for the long-term horizon. Conscientious people are also more likely to have voluntary savings. Social implications Policy programs to increase to be responsible can have positive effects on society's welfare. Originality/value Up to the authors' knowledge, this is the first study that connects clustering algorithms and pension knowledge.