What Dividend Imputation Means for Retirement Savers

31 Pages Posted: 5 Sep 2018

See all articles by Adam Butt

Adam Butt

Australian National University - Research School of Finance, Actuarial Studies & Statistics

Gaurav Khemka

Australian National University (ANU); Financial Research Network (FIRN)

Geoff Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics

Date Written: August 26, 2018

Abstract

We use a stochastic life-cycle model to examine the implications for Australian retirees of full access to dividend imputation credits. 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%, or the equivalent of a higher balance at retirement by 8%-9%. Our study enhances the understanding of equity home bias and provides insights relevant for public policy.

Keywords: Retirement, Dividend Imputation, Life-Cycle Models, Portfolio Construction, Home Bias

JEL Classification: E21, E27, G11, G15, G38

Suggested Citation

Butt, Adam and Khemka, Gaurav and Warren, Geoffrey J., What Dividend Imputation Means for Retirement Savers (August 26, 2018). Available at SSRN: https://ssrn.com/abstract=3238995 or http://dx.doi.org/10.2139/ssrn.3238995

Adam Butt

Australian National University - Research School of Finance, Actuarial Studies & Statistics ( email )

Canberra, Australian Capital Territory 2601
Australia

Gaurav Khemka

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Geoffrey J. Warren (Contact Author)

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics ( email )

CBE Building 26C
Kingsley Sreet, Acton
Canberra, ACT 0200
Australia

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