The Market For Retirement Products In Australia

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...

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Bibliographic Details
Main Author: Brunner, Gregory Gordon
Other Authors: Thorburn, Craig
Format: eBook
Language:English
Published: Washington, D.C The World Bank 2008
Subjects:
Online Access:
Collection: World Bank E-Library Archive - Collection details see MPG.ReNa
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653 |a Safety net 
653 |a Macroeconomics and Economic Growth 
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653 |a International bank 
653 |a Social Protections and Labor 
653 |a Emerging Markets 
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653 |a Finance and Financial Sector Development 
653 |a Pension 
653 |a Economic Theory and Research 
653 |a Labor Policies 
653 |a Financial savings 
653 |a Prudential regulation 
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520 |a 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