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Australia’s Retirement Income System: Implications for Saving and Capital Markets

Author

Listed:
  • Malcolm Edey

    (Reserve Bank of Australia)

  • John Simon

    (Reserve Bank of Australia)

Abstract

Australia is in the early stages of introducing a system of self-provision for retirement through mandatory contributions to private superannuation funds. For most employees, the scheme will eventually replace, either fully or partially, the government age pension, currently relied upon by a large majority of retirees. The scheme has been implemented reasonably smoothly by building on existing financial infrastructure for voluntary superannuation. This paper summarises the historical background of mandatory superannuation in Australia, reviews its potential impact on saving and capital markets, and highlights some remaining policy issues. Perhaps the most important of these is the impact of the system on retirement decisions. A number of features of the system contribute to incentives favouring early retirement and continued reliance on the government pension. Also important is the increasing complexity of the system, a result of the layering of rule changes and grandfathering of existing rights at each stage of the process.

Suggested Citation

  • Malcolm Edey & John Simon, 1996. "Australia’s Retirement Income System: Implications for Saving and Capital Markets," RBA Research Discussion Papers rdp9603, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9603
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    References listed on IDEAS

    as
    1. Hazel Bateman & John Piggott, 1997. "Private Pensions in OECD Countries: Australia," OECD Labour Market and Social Policy Occasional Papers 23, OECD Publishing.
    2. repec:bla:ecorec:v:61:y:1985:i:174:p:613-21 is not listed on IDEAS
    3. Hazel Bateman & Geoffrey Kingston & John Piggott, 1993. "Taxes, Retirement Transfers, and Annuities," The Economic Record, The Economic Society of Australia, vol. 69(3), pages 274-284, September.
    4. Steven Morling & Robert Subbaraman, 1995. "Superannuation and Saving," RBA Research Discussion Papers rdp9511, Reserve Bank of Australia.
    5. F. H. Gruen, 1985. "Australian Government Policy on Retirement Incomes," The Economic Record, The Economic Society of Australia, vol. 61(3), pages 613-621, September.
    6. Bateman, H. & Piggott, J., 1993. "The Superannuation Guarantee Charge: What Do We Know about Its Aggregate Impact?," Papers 93-6, New South Wales - School of Economics.
    7. Malcolm Edey & Robin Foster & Ian Macfarlane, 1991. "The Role of Superannuation in the Financial Sector and in Aggregate Saving: A Review of Recent Trends," RBA Research Discussion Papers rdp9112, Reserve Bank of Australia.
    8. M. E. Atkinson & John Creedy & D. M. Knox, 1995. "Planning Retirement Income in Australia: Routes through the Maze," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(4), pages 15-28, October.
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    Cited by:

    1. Glismann, Hans H. & Horn, Ernst-Jürgen, 1997. "Towards a funded system of social security: Design and implications - The case of Germany -," Kiel Working Papers 836, Kiel Institute for the World Economy (IfW Kiel).
    2. Srinivas, P.S. & Whitehouse, Edward & Yermo, Juan, 2000. "Regulating private pension funds'structure, performance, and investments : cross-country evidence," Social Protection Discussion Papers and Notes 23302, The World Bank.
    3. Olivia S. Mitchell, "undated". "Developments in Pensions," Pension Research Council Working Papers 98-4, Wharton School Pension Research Council, University of Pennsylvania.
    4. Garry F. Barrett & Yi-Ping Tseng, 2008. "Retirement Saving in Australia," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 177-193, November.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania

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