The effect of the Australian Superannuation Guarantee on household saving behaviour

Superannuation Pensions Household survey data Retirement savings Behavioural insights Regulator strategy Australia
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Individual pension accounts are growing in importance as a pillar of retirement incomes policy in the developed world. Policy-makers have generally assumed that by introducing pre-funded pension schemes, they can increase household wealth and thereby raise retirement incomes. However, there has been relatively little empirical work to confirm this.

This paper uses microeconomic data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey to explore three related questions: Have compulsory pension accounts increased household wealth? What effect do compulsory pension accounts have on voluntary saving for retirement? Do compulsory pension accounts influence the timing of retirement?

The paper finds that Australia’s compulsory pension accounts increased household wealth. Voluntary saving for retirement in pension accounts also appeared to increase slightly, possibly due to the added convenience of being able to make contributions directly into these pension accounts. Finally, there is no evidence of a significant effect on retirement intentions. Overall, the results suggest that Australia’s compulsory pension accounts have increased household wealth and raised self-funded retirement incomes.

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