Financial trust and self-directed retirement investing in pension plans

Abstract Despite the increasing popularity of self-directed accounts within pension plans, little is known about what drives voluntary participation in such accounts. This paper examines how financial trust influences the usage of self-directed accounts in Singapore’s national pension scheme using data from the World Values Survey and instrumental variable methods. We find that financial trust drives self-investment of pension monies: A one-unit increase in trust increases the likelihood of participation by 45 percentage points, controlling for covariates. This finding remains robust when potential endogeneity and alternative empirical specifications are considered. Our findings highlight the critical role of trust in shaping retirement investment behavior and pension choices.