'Don't Play if You Can't Win': Exploring Household Disengagement with the Pension System through Financial Diaries Data

Abstract

Household disengagement in retirement planning is an important policy issue across the OECD. In contrast to conventional behavioural economics framing, this paper draws on the literature on political alienation and insider/outsider theory to explore links between distributional outcomes and household engagement with Australia’s defined contribution pension system. The paper argues that support for the system is much weaker than assumed in the empirical literature, which tends to ignore concerns about equity even as they arise in empirical research, because distributional issues don’t sit comfortably in the prevailing behavioural framework. Supported by preliminary data on the government’s COVID related early withdrawal scheme, the paper uses primary survey data collected in a financial diaries study to construct objective and subjective measures of attitudes, engagement and distributional outcomes for individual households in the pension system. The analysis finds widely held concerns about fairness and a positive correlation between disengagement and poor distributional outcomes within the pension system.

Keywords: superannuation, households, inequality, financial diaries

JEL Classification: J32, G41, D31