Australia's Retirement Income System:Historical Development and Effects of Recent Reforms

Over the past decade, changes to Australia’s retirement income policy have been announced in almost every Federal Budget, with no signs yet that reform is coming to an end. Indeed, the Simpler Super reforms announced in the 2006 Federal Budget have been described as the largest overhaul of Australia’s superannuation system since the introduction of compulsory superannuation. This paper describes the current retirement system in Australia and provides a summary of the historical development of the Australian retirement system, with special emphasis placed on the recent reform initiatives designed to increase labour force participation of mature age Australians, provide higher levels of savings for retirement, and reduce reliance on the Age Pension as the main source of retirement income. The final section of the paper contains a review of the existing research addressing the issue of whether recent changes to retirement income policy will in fact have their intended effects. At this point it is still unclear whether these reforms will increase mature age labour force participation or reduce reliance on the Age Pension. Indeed, some have argued that these policy changes create perverse incentives, and will encourage early retiremen.