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Offsets to compulsory superannuation: do people consciously choose their level of retirement saving?

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  • Akshay Shanker
  • Sacha Vidler

Abstract

Australian employers are obliged by law to make a minimum compulsory contribution as a proportion of salaries into employees’ superannuation (pension) funds. Individuals can also make voluntary contributions on top of the compulsory amount. We examine voluntary contributions amongst two groups of employees on different compulsory rates within the same fund. We ask whether individuals make voluntary superannuation contributions according to independent preferences representing how much people believe their overall savings should be. If individuals did have independent preferences, then we should expect less people to make voluntary contributions on the higher compulsory rate, and also expect reduced average voluntary contributions (across those who do and do not make voluntary contributions). We do not find evidence of either. An increase in the compulsory rate seems to be carried over totally into an increase in total contributions; either because individuals make voluntary contributions without any consideration of how much their overall savings ought to be, or because the compulsory rate influences the subjective evaluations of savings preferences (effectively anchoring bias).

Suggested Citation

  • Akshay Shanker & Sacha Vidler, 2014. "Offsets to compulsory superannuation: do people consciously choose their level of retirement saving?," CAMA Working Papers 2014-65, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2014-65
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2014-10/65_2014_shanker_vidler.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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