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Australia’s Retirement System: Strengths, Weaknesses, and Reforms

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  • Julie Agnew

Abstract

Australia’s retirement income system is regarded by some as among the best in the world. It has achieved high individual saving rates and broad coverage at reasonably low cost to the government. Australia’s system does have shortcomings. It is heavily dependent on defined contribution plans and is vulnerable to weaknesses in such programs. Its government old-age pension is a means-tested benefit, which creates potentially troublesome incentives for workers with defined contribution accounts. This brief provides an overview of the system and recent reforms. The first section presents the Australian system. The second section reviews recent reforms, which have focused on the individual account component of the system. The third section discusses outstanding issues. The fourth section offers some potential lessons for the U.S. retirement system. The final section concludes that the recent reforms should strengthen Australia’s system and provide lessons to other nations that increasingly depend on 401(k)-type individual accounts.

Suggested Citation

  • Julie Agnew, 2013. "Australia’s Retirement System: Strengths, Weaknesses, and Reforms," Issues in Brief ib2013-5, Center for Retirement Research.
  • Handle: RePEc:crr:issbrf:ib2013-5
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    File URL: http://crr.bc.edu/briefs/australia%E2%80%99s-retirement-system-strengths-weaknesses-and-reforms-2/
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    References listed on IDEAS

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    1. Bassett, William F. & Fleming, Michael J. & Rodrigues, Anthony P., 1998. "How Workers Use 401(K) Plans: The Participation, Contribution, and Withdrawal Decisions," National Tax Journal, National Tax Association, vol. 51(2), pages 263-289, June.
    2. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "Defined Contribution Pensions: Plan Rules, Participant Choices, and the Path of Least Resistance," NBER Chapters,in: Tax Policy and the Economy, Volume 16, pages 67-114 National Bureau of Economic Research, Inc.
    3. Gur Huberman & Sheena Iyengar & Wei Jiang, 2007. "Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates," Journal of Financial Services Research, Springer;Western Finance Association, vol. 31(1), pages 1-32, February.
    4. Gary V. Engelhardt & Anil Kumar, 2007. "Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study," NBER Chapters,in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 1920-1943 National Bureau of Economic Research, Inc.
    5. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment," NBER Chapters,in: Research Findings in the Economics of Aging, pages 311-327 National Bureau of Economic Research, Inc.
    6. William E. Even & David A. Macpherson, 2004. "Determinants and Effects of Employer Matching Contributions in 401(k) Plans," Labor and Demography 0405001, EconWPA.
    7. Papke, Leslie E. & Poterba, James M., 1995. "Survey evidence on employer match rates and employee saving behavior in 401(k) plans," Economics Letters, Elsevier, vol. 49(3), pages 313-317, September.
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    Cited by:

    1. Frijters, Paul & Johnston, David W. & Shields, Michael A. & Sinha, Kompal, 2015. "A lifecycle perspective of stock market performance and wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 237-250.
    2. John Beshears & James J. Choi & Joshua Hurwitz & David Laibson & Brigitte C. Madrian, 2015. "Liquidity in Retirement Savings Systems: An International Comparison," American Economic Review, American Economic Association, pages 420-425.
    3. Wei-Ting Pan, 2016. "The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 32.

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