Publication: The Market for Retirement Products in Australia
Date
2008-10
ISSN
Published
2008-10
Author(s)
Brunner, Gregory Gordon
Thorburn, Craig
Abstract
Australia introduced a mandatory
retirement savings scheme in 1992. This built on
pre-existing voluntary occupational plans. The new scheme
has been very successful in expanding coverage and
mobilizing large financial savings that are equal to close
to 100 percent of GDP. However, Australia does not impose
restrictions on payout options. The payout phase used to be
dominated by lump sum withdrawals, which accounted for 80
percent of benefit payments as recently as 2002. But pension
payments increased in recent years and now represent 45
percent of total payments. The vast majority of these
pension payments take the form of term annuities and
allocated annuities. The latter are similar to phased
withdrawals in Chile but run for fixed terms of up to 25
years rather than for lifetime terms. The demand for life
annuities and lifetime phased withdrawals is very limited.
The paper discusses the factors that have shaped the pattern
of demand for retirement products, including the
availability of the universal age pension and the effect of
clawback provisions, the impact of the high level of home
ownership, and the widespread preference of retiring workers
for reliance on self-annuitization. The paper also reviews
the prudential regulation of superannuation funds and life
insurance companies.
Citation
“Brunner, Gregory Gordon; Thorburn, Craig. 2008. The Market for Retirement Products in Australia. Policy Research Working Paper; No. 4749. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/0d3d54b9-28e5-54df-97ba-84d3305d2be3 License: CC BY 3.0 IGO.”
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