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Australia’s Retirement Income System: Implications for Saving and Capital Markets

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  • Malcolm Edey

    (Reserve Bank of Australia)

  • John Simon

    (Reserve Bank of Australia)

Abstract

Australia is in the early stages of introducing a system of self-provision for retirement through mandatory contributions to private superannuation funds. For most employees, the scheme will eventually replace, either fully or partially, the government age pension, currently relied upon by a large majority of retirees. The scheme has been implemented reasonably smoothly by building on existing financial infrastructure for voluntary superannuation. This paper summarises the historical background of mandatory superannuation in Australia, reviews its potential impact on saving and capital markets, and highlights some remaining policy issues. Perhaps the most important of these is the impact of the system on retirement decisions. A number of features of the system contribute to incentives favouring early retirement and continued reliance on the government pension. Also important is the increasing complexity of the system, a result of the layering of rule changes and grandfathering of existing rights at each stage of the process.

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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9603.

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Date of creation: Sep 1996
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Handle: RePEc:rba:rbardp:rdp9603

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  1. M. E. Atkinson & John Creedy & D. M. Knox, 1995. "Planning Retirement Income in Australia: Routes through the Maze," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(4), pages 15-28.
  2. Gruen, F H, 1985. "Australian Government Policy on Retirement Incomes," The Economic Record, The Economic Society of Australia, vol. 61(174), pages 613-21, September.
  3. Hazel Bateman & John Piggott, 1997. "Private Pensions in OECD Countries: Australia," OECD Labour Market and Social Policy Occasional Papers 23, OECD Publishing.
  4. Kingston, G. & Piggott, J. & Bateman, H., 1992. "Taxes, Retirement Transfers, and Annuities," Papers 92-18, New South Wales - School of Economics.
  5. Steven Morling & Robert Subbaraman, 1995. "Superannuation and Saving," RBA Research Discussion Papers rdp9511, Reserve Bank of Australia.
  6. Bateman, H. & Piggott, J., 1993. "The Superannuation Guarantee Charge: What Do We Know about Its Aggregate Impact?," Papers 93-6, New South Wales - School of Economics.
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Cited by:
  1. Srinivas, P.S. & Whitehouse, Edward & Yermo, Juan, 2000. "Regulating private pension funds'structure, performance, and investments : cross-country evidence," Social Protection Discussion Papers 23302, The World Bank.
  2. Olivia S. Mitchell, . "Developments in Pensions," Pension Research Council Working Papers 98-4, Wharton School Pension Research Council, University of Pennsylvania.
  3. Garry Barrett & Yi-Ping Tseng, 2007. "Retirement Saving in Australia," Social and Economic Dimensions of an Aging Population Research Papers 177, McMaster University.

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