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

38 Pages Posted: 22 Apr 1997 Last revised: 12 May 2000

See all articles by Malcolm Edey

Malcolm Edey

Reserve Bank of Australia

John A. Simon

Reserve Bank of Australia - Economic Research

Date Written: October 1996

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 summarizes 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

Edey, Malcolm and Simon, John A., Australia's Retirement Income System: Implications for Saving and Capital Markets (October 1996). NBER Working Paper No. w5799. Available at SSRN: https://ssrn.com/abstract=4840

Malcolm Edey (Contact Author)

Reserve Bank of Australia

GPO Box 3947
Sydney, 2000
Australia

John A. Simon

Reserve Bank of Australia - Economic Research ( email )

GPO Box 3947
Sydney, NSW 2001
Australia

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