Retirement Savings Investment Choices in Response to the Global Financial Crisis: Australian Evidence

40 Pages Posted: 12 Jun 2010

See all articles by Paul Gerrans

Paul Gerrans

The University of Western Australia - UWA Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 10, 2010

Abstract

This paper examines the retirement savings investment choices of Australian workers over a three year period, including the global financial crisis (GFC). The analysis is based on a large sample of 3.6 million members drawn from five superannuation funds with assets of $74 billion. Australian workers have a compulsory nine percent of wages paid by their employer into a superannuation fund account (equivalent to 401(k) accounts), and can in turn choose from an investment option menu to invest these contributions. The overwhelming majority of members did not change their investment strategy in response to the GFC. However, a smaller group, which varied between five and seven percent of members across funds, who did make a change clearly responded to short-term market performance. Further, the timing of investment change and the relative propensity to make a change varied significantly by member demographics. Finally, how members constructed their investment strategy in terms of combining single asset class options or selecting options with predetermined asset allocations, such as balanced or growth options, changed notably during the worst of the GFC period. The implications for both members and the superannuation funds of the observed investment choice behaviour are discussed.

Keywords: Retirement Savings, Superannuation, Investment Choice, Savings, Pensions

JEL Classification: G23, D91

Suggested Citation

Gerrans, Paul, Retirement Savings Investment Choices in Response to the Global Financial Crisis: Australian Evidence (June 10, 2010). Australian Centre for Financial Studies - Finsia Banking and Finance Conference 2010. Available at SSRN: https://ssrn.com/abstract=1623549 or http://dx.doi.org/10.2139/ssrn.1623549

Paul Gerrans (Contact Author)

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia
61 8 64882910 (Phone)

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