Age Pensioner Decumulation: Responses to Incentives, Uncertainty and Family Need

Posted: 26 Oct 2017

See all articles by Ramona Meyricke

Ramona Meyricke

UNSW Australia Business School, School of Risk & Actuarial Studies; CEPAR, University of New South Wales; Swiss Re, Australia

Susan Thorp

The University of Sydney Business School

Shang Wu

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)

Anthony Asher

University of New South Wales (UNSW) - School of Actuarial Studies

Date Written: May 3, 2017

Abstract

Effective design and regulation of retirement benefits require accurate understanding of how the elderly decumulate. We analyse the income, assets and decumulation patterns of a longitudinal panel of 10,000 Australian age pensioners. On average, age pensioners preserve financial and residential wealth and leave substantial bequests. There is, however, considerable heterogeneity in decumulation patterns. Younger households generally run down financial wealth, while older households maintain their assets or save. Means-testing accelerates decumulation, with average drawdown rates 3% higher for pensioners subject to the income test relative to full pensioners and 9% higher for those subject to the asset test relative to full pensioners. Loss of a partner is linked to large falls in assets. The theoretical, empirical, and practical implications of these findings are discussed.

Keywords: Life-cycle saving, portfolio choice, public pension, retirement wealth

JEL Classification: D91, E21, G11

Suggested Citation

Meyricke, Ramona and Thorp, Susan and Wu, Shang and Asher, Anthony, Age Pensioner Decumulation: Responses to Incentives, Uncertainty and Family Need (May 3, 2017). Australian Journal of Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3059627

Ramona Meyricke

UNSW Australia Business School, School of Risk & Actuarial Studies ( email )

Room 2058 South Wing 2nd Floor
Quadrangle building, Kensington Campus
Sydney, NSW 2052
Australia

CEPAR, University of New South Wales ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

Swiss Re, Australia ( email )

363 George St
Sydney, NSW 2000
Australia

Susan Thorp

The University of Sydney Business School ( email )

Abercrombie Building
H70
The University Of Sydney, NSW 2006
Australia
0290366354 (Phone)

Shang Wu

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

Anthony Asher (Contact Author)

University of New South Wales (UNSW) - School of Actuarial Studies ( email )

Sydney, NSW 2052
Australia
612 9385 7619 (Phone)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/AnthonyAsher.aspx

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