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Means-tested Age-Pension and Saving

  • Sang-Wook (Stanley) Cho

    (School of Economics, Australian School of Business, the University of New South Wales)

  • Renuka Sane


    (Indian Statistical Institute, Delhi)

We investigate whether households adjust retirement savings decisions in re-sponse to changes in the means-tested public pension plans. The policy in question lowered the taper rate of the assets test on the age pension in Australia in 2007. We use HILDA, a detailed micro panel data-set for Australian households and focus on the age group between 50 and 64 in 2006, prior to the reform. We compare savings behaviours of those who were constrained to increase financial wealth because of the assets test prior to the reform with those who were not constrained, and find that assets tests do have a perverse impact on saving.

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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2014-03.

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Length: 34 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:swe:wpaper:2014-03
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  1. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
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  7. Neumark, David & Powers, Elizabeth, 1998. "The effect of means-tested income support for the elderly on pre-retirement saving: evidence from the SSI program in the U.S," Journal of Public Economics, Elsevier, vol. 68(2), pages 181-206, May.
  8. James Sefton & Justin vandeVen, 2009. "Optimal Design of Means Tested Retirement Benefits," Economic Journal, Royal Economic Society, vol. 119(541), pages F461-F481, November.
  9. Gittleman Maury, 2011. "Medicaid and Wealth: A Re-Examination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-25, November.
  10. James Sefton & Justin vandeVen & Martin Weale, 2008. "Means Testing Retirement Benefits: fostering equity or discouraging savings?," Economic Journal, Royal Economic Society, vol. 118(528), pages 556-590, 04.
  11. Deborah A. Cobb-Clark & Vincent Hildebrand, 2009. "Portfolio Allocation in the Face of a Means-Tested Public Pension," Social and Economic Dimensions of an Aging Population Research Papers 260, McMaster University.
  12. Dr Justin van de Ven, 2009. "Optimal Design of Means Tested Retirement Benefits," NIESR Discussion Papers 2272, National Institute of Economic and Social Research.
  13. Dr Justin van de Ven & Dr Martin Weale, 2006. "Means Testing Retirement Benefits: fostering equity or discouraging savings?," NIESR Discussion Papers 1389, National Institute of Economic and Social Research.
  14. Alex Maynard & Jiaping Qiu, 2009. "Public insurance and private savings: who is affected and by how much?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(2), pages 282-308, 03.
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