The Effect of the Australian Superannuation Guarantee on Household Saving Behaviour by Ellis Connolly

Whilst these percentages had changed significantly it was also found that the types of people who were living under the poverty line were still the same. In this report it was found that 75 percent of those living below the poverty line were not in the workforce, and that the aged made up 41 per cent of all Australians that were living in poverty. (Williams, Lawrey 2000) Therefore it is clear that although the poverty line had risen significantly from 1975 to 1987, there has not been an improvement in the percentage of Australians living under the poverty line, but instead this percentage has increased.

Over the last two decades the Australian population has faced a number of economic instabilities that has seen the gap between the ‘haves’ and ‘have nots’ increase. To determine who the ‘haves’ and ‘have nots’ are an in-depth investigation will be performed examining the circumstances under which the gap can be manipulated. The economic wellbeing of individuals is largely determined by their command over economic resources (ABS, 2009). The wellbeing of individuals who are classified as ‘haves’ are usually people who are asset rich, contain bonds, shares and are fairly affluent. The wellbeing of individuals who are classified as ‘have nots’ are usually the working poor, who have little assets and little investments i.e. bonds. These

The disparities accounted for in the distribution of wealth and income tends to reflect wealth that is accumulated during a person’s working life and utilised during retirement. Whilst this sources the foundation of inequality, the distribution of income in Australia is influenced by socio-economic factors such as gender, age, occupation and ethnicity. Gender is a common inconsistency in various economies, during 2013 average weekly earnings for males were $1516 while females earned $1250, this is still coherent for males and females in the same occupational categories, and is augmented for opposite genders in different occupational categories. In terms of ethnicity, it has been recorded that persons born overseas earn more than persons born in Australia, that non-English speaking backgrounds earn less than English speaking backgrounds and the period of residence in Australia is proportional to the income earned. However, the lowest income earners in the Australian community are Indigenous Australians and being heavily reliant on government welfare, earn a substantial loss in income compared to that

The Federal Reserve Board’s Survey of Consumer Finances (SCF) is a triennial cross-sectional survey of U.S. families. The study is sponsored by the Federal Reserve Board in collaboration with the Department of the Treasury. The survey data include information on family incomes, net worth, balance sheet components, credit use, pensions, income, and demographic characteristics (Bricker, et al., 2014). A strong attempt is made to select families from all economic levels. In addition, information is also included from related surveys of pension providers and the earlier surveys conducted by the Federal Reserve Board. Data from the Survey of Consumer Finances is utilized by the Federal Reserve and other branches of the government to conduct analysis. In addition, economic research centers utilize the SCF to conduct scholarly work (Board of Governors, 2014).

In the coming decade, over 20 percent of the national population will reach the age of retirement. Not to mention, many studies have shown that numerous baby boomers are not financially prepared for retirement. A survey taken place in 2015 with 12,000 Canadians showed that 49 percent of people aged 55 to 64 had saved less than 10 percent of their savings target for retirement to date. In addition, there will be a decline in workplace pension plans due to the aging baby boomers which means that only 24 percent of private sector workers are funded through the pension plan. This indicates the importance of baby boomers to finance their retirement. On the other hand, the current low interest rates are making it more difficult for the boomers to save for retirement. The result will undoubtedly have many boomers maintaining a steady life or cause suffering to many others living a lower standard of living. In conclusion, the pre-retirement baby boomers cannot fully reply on the government for financial support and should think about their future financial state if they want it to resemble their current

Clearly, we can see from the table that 11% of all households whose total amount of population was 1,837,000 lived in poverty. The proportion of poor single person with no children was 19% (population 54,000), whereas sole parent had 21% people (population 232,000) who lived in poverty. However, couple with no children had a 7% of population (population 211,000) living in poverty, whilst the proportion of poor couple with children who was poor account for 12% (933,000). In addition, there was 6% of single aged person who lived in poverty, whereas only 4% aged people (population 48,000) lived in poverty.

Income distribution sits at the top of the political agenda as Inequality between those with the most and those with the least wealth in Australia is on the rise. Despite consistent public support for reducing inequality in the distribution of income, the government is seeking to reduce income support. In fact, in recent months the Liberal government has begun to argue that inequality is not just unavoidable, but also beneficial. Rather than use the welfare system to redistribute income, the government is seeking to ensure that welfare payments grow at a significantly slower rate than wages

The introduction of superannuation funds is to provide retirement and death benefits to its members as the increase in Australia’s ageing population has become problematic. By encouraging individuals to save more throughout their working life and to place those funds their retirement, the aim is to ensure a lesser proportion of public funds are directed towards pensions and enhance the living standards of retired Australians” (ALRC, 2013). The fund is set up as an indefinitely continuing fund. Superannuation funds are managed by a trustee and are regulated by APRA and ASIC. To be eligible to receive a serviceable tax treatment, a Superfund must be accommodating with the Superannuation Industry

A pension policy for the province of Ontario is being discussed, in an attempt to make it more effective or being readily available. The existing issue is how it functions in low interests rates and low returns in equity markets. Also, the low participation in such plans is failing the system as a whole. It is important the government to protect workers in the private sector; as it is noted one-third of the paid workforce in 2005 was in a registered pension plan. Canada lacks when it comes to voluntary employer-sponsored pension plans and tax-assisted programs, like the TFSA, who must improve their services. The current pension plan fails to accommodate for private sector workers that are provided with no other occupation-related pension program other than the CPP. Many of the solvency funding rules are still adopted from the Ontario Pension Benefits Act in 1966. The voluntary participation system has failed in Canada. The government must change into a compulsory contribution system for it to achieve the sufficient accumulation of assets. It is of concern that “nearly two thirds of private sector DB pensions plans operated either closed or frozen plans”. All pension plans should be based on individual circumstances, but currently the system lacks in regulating. The other main issue is low household saving rates that are misbalancing pension funds reserves. Many politicians are focusing on the type of pension scheme to use, instead of finding a way to increase the level

The article titled ‘Who is missing out? Hardship among low income Australians’ (Healey, 2007, p. 8) summarises outcomes and key findings from the very first report by the Australian Council of Social Services, released in 2007 (Australian Council of Social Service, 2014, p. 8). The report reviewed both the accuracy of social security payments and the government’s tax-transfer system (Healey, 2007, p. 8) with considerations of the government at the time, reviewing the entire Australian social security system. The independent report extracted direct experiences of people affected by poverty and inequalities from its diverse member base, with particular focus on households that were receiving social security

We need to take into consideration that income will not always reflect the extent to which a family can afford necessities. So when measuring and accessing whether someone lives in poverty we need to take into account both low income and material deprivation. This is because an individual may not fall below the poverty line, but lacks the basic necessities for everyday life and this needs to be acknowledged as it is an important factor contributing to a good quality of life. But as we know in this context, household income is measured after the effect of taxes and benefits (i.e., disposable income) and is equalized to adjust for differences in household size and composition, (McGuiness, 2017). We know this is a good concept as it is intended to account for the fact that a large household will need a higher level of income to have the same standard of living as a smaller household. Income can be measured before or after housing costs are deducted (BHC or AHC). Its suggested that poverty levels tend to be higher based on income measured after housing costs, because poorer households tend to spend higher proportion of their income on housing.

For the baby boomer males of Hawkesbury and in this case Phil, the subject’s total accumulated superannuation fund after deflation would amount to $187,120.09. However, 3 years after Phil’s retirement his superannuation would’ve ran out and he will be faced with relying on the pension for 17 years until his death.

The information on the scale of poverty among elderly receiving state pension came after last year`s government decision to remove ten millions pounds from the budget of Social Security,which resulted in the benefit cuts for those with the lowest incomes. While those cuts did not affect state pension itself, which currently stands at £ 204.15 full rate per week for single person and £339.01 per couple (gov.je/benefits/pensionsretirement), it had an impact on additional benefits claimed through means tested Income Support (IS) which are household benefits designed to aid in meeting the most basic needs of a Jersey resident such as `the cost of living, housing, medical needs, childcare and carers` (http://www.gov.je/Benefits/IncomeSupport/Pages/index.aspx). The rationale behind the state pension with the Income Support components was that it would lift households at least to the level of a Relative

The concept of superannuation was introduced through the Superannuation Guarantee (SG) with the idea of managing, accumulating and growing assets of members so that once retirement arrives they can enjoy a higher standard of living without concern for a shortage of income when retirement occurs, they arrive in the form of pension, lump sums or both. It is further explained by Dawkins (1992) that our current retirement income system was weak and that there was a need to strengthen Australia’s national saving performance. He stated “Greater domestic saving will relax the current account constraint on Australia’s economic performance. It will mean that we can grow faster without relying so heavily on foreign saving and building up an

The assumption that households like to smooth their consumption over their lifetime from year to year is the key component for the Life Cycle Hypothesis and Permanent Income hypothesis for them to actually hold. For people to be able to smooth their consumption, they have to be very forward looking and have the ability to save and borrow to compensate for income changes. The extent to which this is true has been a central idea to many economists and researchers and they all have evidence which backs up the ideas of the theories. However, there is a lot of evidence that questions consumption smoothing being realistic and true to all people in different stages of their life. To assess the vision of consumption smoothing, we shall critically assess the idea and evaluate empirical evidence that have solely focused their research on this including the retirement consumption puzzle. By looking at relevant articles and journals which are focused on the reliability of the Life Cycle Hypothesis and Permanent Income Hypothesis, we shall come to a conclusion on whether every household does infact smooth their consumption or if it is just a handful of consumers that fit a certain criteria.