The Impact of Workplace and Personal Superannuation Schemes on Net Worth: Evidence from the Household Savings Survey
AbstractThe central question addressed in this paper is: does having a workplace or personal superannuation scheme result in a higher level of accumulation for retirement? The paper presents a range of information about the participation and level of holdings in workplace and personal superannuation schemes based on data from the Household Saving Survey (HSS). While the proportion of people holding a scheme is small (around 10%), the value of a scheme for those enrolled represents about one third their total net worth. There is evidence that being enrolled in a workplace scheme is associated with higher levels of total net worth, yet this is not true of personal schemes, once several personal characteristics have been controlled for. Nevertheless, it is evident that those in either workplace schemes or personal have not fully substituted this form of saving for other vehicles. In fact in all cases there appears to be complementarity, whereby higher holdings in a scheme are associated with higher holdings in other forms of savings. Typically, an additional dollar invested in a workplace scheme is associated with higher total net worth of between one and two dollars, while for personal schemes the figure typically exceeds two dollars. Two possible explanations for this arise. The first is that by enrolling in a scheme an individual acquires heightened awareness of the importance of retirement saving and saves additional amounts in other vehicles. An alternative hypothesis is that there may be some self-selection bias; those who have enrolled might be more inclined to save than the population as a whole. There is no direct way to use the data to discriminate between these two possibilities. However holding constant a wide range of other factors (including age, income, ethnicity, residence, etc) it is reasonable to suppose that the more likely sources of selection bias may have been controlled for. If this is the case then the finding that more holdings of workplace superannuation are associated with greater total retirement wealth may well have arisen from an "awareness" or "recognition" effect of belonging to a scheme. In this event, policies which foster enrolment might lead to greater retirement accumulation by those in a scheme.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 04/08.
Length: 31 pages
Date of creation: Jun 2004
Date of revision:
Contact details of provider:
Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
More information through EDIRC
Superannuation; Retirement; New Zealand; Net Worth: Saving; Household Behaviour;
Find related papers by JEL classification:
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-06-27 (Accounting & Auditing)
- NEP-ALL-2004-06-27 (All new papers)
- NEP-LAB-2004-06-27 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dr Jon D. Stanford & Michael E. Drew, 2003.
"A Review Of Australia's Compulsory Superannuation Scheme After A Decade,"
Discussion Papers Series
322, School of Economics, University of Queensland, Australia.
- Michael E. Drew & Jon D. Stanford, 2003. "A Review of Australia’s Compulsory Superannuation Scheme After a Decade," School of Economics and Finance Discussion Papers and Working Papers Series 127, School of Economics and Finance, Queensland University of Technology.
- Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
- Choi, James J. & Laibson, David & Madrian, Brigitte C., 2004.
"Plan Design and 401(k) Savings Outcomes,"
National Tax Journal,
National Tax Association, vol. 57(2), pages 275-98, June Cita.
- Philip Cagan, 1965. "The Effect of Pension Plans on Aggregate Saving: Evidence from a Sample Survey," NBER Books, National Bureau of Economic Research, Inc, number caga65-2, September.
- Grant Scobie & John Gibson & Trinh Le, 2004. "Saving for Retirement: New Evidence for New Zealand," Treasury Working Paper Series 04/12, New Zealand Treasury.
- Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1487-1519, August.
- Munnell, Alicia H, 1976. "Private Pensions and Saving: New Evidence," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1013-32, October.
- Hubbard, Robert Glenn, 1985. "Personal Taxation, Pension Wealth, and Portfolio Composition," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 53-60, February.
- Janice Burns & Maire Dwyer, 2007. "Households'attitudes to savings, investment and wealth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Web and Publishing Team, The Treasury).
If references are entirely missing, you can add them using this form.