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What Dividend Imputation Means for Retirement Savers

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  • Adam Butt
  • Gaurav Khemka
  • Geoffrey J. Warren

Abstract

We examine the implications for Australian retirees of full access to dividend imputation credits using a stochastic life‐cycle model. We find that the availability of imputation credits can justify a significant bias towards Australian equities in retirement portfolios, largely at the expense of world equities. We also generate estimates of the value of imputation credits to retirees, finding it could potentially support increased consumption during retirement of 5–6 per cent, or equivalent value to a 8–9 per cent higher balance at retirement. Our study enhances the understanding of equity home bias, and provides insights relevant for public policy.

Suggested Citation

  • Adam Butt & Gaurav Khemka & Geoffrey J. Warren, 2019. "What Dividend Imputation Means for Retirement Savers," The Economic Record, The Economic Society of Australia, vol. 95(309), pages 181-199, June.
    • Handle: RePEc:bla:ecorec:v:95:y:2019:i:309:p:181-199
    DOI: 10.1111/1475-4932.12468
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    Cited by:

    1. Geoffrey J Warren, 2022. "Design of comprehensive income products for retirement using utility functions," Australian Journal of Management, Australian School of Business, vol. 47(1), pages 105-134, February.
    2. Butt, Adam & Khemka, Gaurav & Warren, Geoffrey J., 2022. "Heterogeneity in optimal investment and drawdown strategies in retirement," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    3. Gaurav Khemka & Yifu Tang & Geoffrey J. Warren, 2021. "The ‘right’ level for the superannuation guarantee: identifying the key considerations," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4435-4474, September.

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