The Australian retirement lottery: A system failure

Amandha Ganegoda and John Evans
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Amandha Ganegoda: ANZ Bank, Melbourne, VIC, Australia
John Evans: Sydney Business School, University of Wollongong, Sydney, NSW, Australia

Australian Journal of Management, 2017, vol. 42, issue 1, 3-31

Abstract: The purpose of this paper is to assess the adequacy of the Australian retirement system to fund the needs of retirees by taking into account both the Knightian risk arising from market volatility under normal market conditions as well as the Knightian uncertainty arising from rare but severe market shocks. We have also taken into account changes in employment during the pre-retirement phase. Given the low frequency, high impact of market shocks, the result is that cohorts of Australian retirees will enjoy very different levels of retirement income and there will be consequent shocks to the demand for the Age Pension supplement and potentially, significant variations in the standard of living in retirement for Australian employees. Whilst the Australian retirement system has been put forward as a model for other economies to follow, we find there is a fundamental flaw in the system.

Keywords: Superannuation guarantee levy; retirement funding; market shocks; econometric modeling (search for similar items in EconPapers)
JEL-codes: C5 G17 G18 I31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:42:y:2017:i:1:p:3-31

DOI: 10.1177/0312896214554267

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