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Pensions, Retirement and Ageing Seminar Series 2021


Image: UNSW Business School building

Seminars take place fortnightly on a Monday from 12.00-1.00pm for the seminar & 1.00-1.30pm for informal chat with the speaker (UTC+11, Australian Eastern Daylight Time)* and provide an excellent opportunity to network with pensions, ageing and retirement experts from Australia and overseas. CEPAR and the School of Risk & Actuarial Studies at UNSW Sydney have been hosting this multidisciplinary seminar series since 2012 with the aim of encouraging interaction between academic researchers from a broad range of disciplines – including, but not restricted to economics, actuarial studies, finance, psychology, law, accounting, sociology, management, marketing and medicine – as well as from industry and government.

Subject to COVID-19 restrictions in place at the time, seminars are run in dual mode to allow for both in-person and online presentations and attendance, however, if circumanstances restrict in-person attendance, CEPAR will revert to an online event entirely. Attendees will be notified.

Please contact Gaoyun (Sophie) Yan if you are interested in presenting, participating or would like to be added to the Pensions, Retirement and Ageing Seminar Series mailing list. 

Speakers interested in presenting their research on issues associated with pensions, retirement and/or ageing in the 2021 seminar series should contact Gaoyun (Sophie) Yan. Presentations based on complete papers or ‘work-in-progress’ are welcome. We invite participation from academics and research students from UNSW and other universities as well as from researchers in industry and government.

2021 Schedule

Held fortnightly on Mondays from 12-1pm (AEST):

22 FebruaryA review of the proposed Your Future, Your Super performance test - David Bell (The Conexus Institute)

22 March - The Economic Incidence of SuperannuationRobert Breunig (ANU)

12 April Negotiating flexibility for double care: the experience of migrant old age care workers in China - Bingqin Li (UNSW Sydney)

3 May - Retirement eggs and retirement baskets - Akshay Shanker and Isabella Dobrescu (UNSW Sydney, CEPAR)

10 May - Willingness to take financial risks and insurance holdings: A European survey - Katja Hanewald (UNSW Sydney)

31 May - Socioeconomic position and healthy ageing: a systematic review of cross-sectional and longitudinal studies - Saman Khalatbari-Soltani (University of Sydney, CEPAR)

7 June (11.30am-12.30pm) The impact of mortgage brokers on borrowers' preferences and perceptions - Sol Chung (University of Sydney Business School, CEPAR)

30 August A History of the Taxation of Retirement Incomes in Australia - Paul Tilley (Tax and Transfer Policy Institute, Australian National University)

13 September - I Can See Super Balances of Dead People - Ross Clare (ASFA)

27 September (3-4pm) - Pension Systems in the Developing World: Current Challenges and Future Directions - Seda Peksevim (Bogazici University)

11 October How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme - Ha Vu (Deakin University)

25 October Is there Empirical Evidence of Industry Superannuation Funds adopting Aggressive Tax Strategies? - Thulaisi Sivapalan (UTS)

22 November - Cognitive Aging, Misperception, and Health Management - Xi Chen (Yale University)

Abstracts and Recordings

Title: A review of the proposed Your Future, Your Super performance test

Speaker: David Bell
Affiliation: The Conexus Institute, CEPAR

Abstract: The Government recently announced the Your Future Your Super (YFYS) reforms as part of the 2020 Budget. There is merit in protecting consumers with a performance test. However, it needs to be an effective performance test with limited undesirable outcomes. Unfortunately, our analysis suggests the YFYS performance test does not meet these goals: it will be ineffective at identifying poor performing funds while introducing a range of undesirable outcomes. We are concerned that the detriments of the YFYS performance test may outweigh the benefits.   (Material can be found here).

Title: The Economic Incidence of Superannuation

Speaker: Robert Breunig
Affiliation: Tax and Transfer Policy Institute, ANU

Abstract: This paper evaluates the economic incidence of superannuation by comparing workers who receive superannuation at the government guarantee rate to those who receive superannuation above the guarantee rate. We compare wage growth between these two groups during periods when the superannuation guarantee is constant. We also use a difference-in-difference approach to assess whether wage growth changes for workers at the government guarantee rate relative to those who are paid above the guarantee during periods when the guarantee rate is increasing. We use fixed-effects models to control for initial income levels and other individual characteristics. The results suggest that wage growth for workers who receive above the superannuation guarantee rate is consistently lower than wage growth for those who receive the superannuation guarantee. As a result, total compensation across the two groups of workers tends to converge over time suggesting that workers initially bear the majority of the incidence of superannuation and over time they bear the full incidence. Results from the difference-in-difference analysis provide similar results and suggest that between 71% to more than 100% of increases in the superannuation guarantee are offset by lower wage growth; workers bear most of the incidence of increases in the superannuation guarantee.

Title: Negotiating flexibility for double care: the experience of migrant old age care workers in China

Speaker: Bingqin Li
Affiliation: UNSW Sydney

Abstract: Internationally, the care labour force is gendered, and care workers are primarily migrant or immigrant women (Pyle, 2006). They play an increasingly important role in meeting the growing demand for social care (Turnpenny and Hussein 2021). However, the problems of high turnover rate and high vacancies remain to be serious (Dromey and Hochlaf 2018).

As the threat of population aging is looming large in China, policymakers' foci are still on the finance of care and providing infrastructures of care. However, as these two aspects are improving overtime, the challenge of the insufficient care labour force become more serious. Apart from the popular suggestions of younger older people to look after the older old people, using robots to replace human labour (Cho, Martin et al. 2015, Pino, Boulay et al. 2015) and attracting more migrant carers from other countries as has done by other East Asian countries, it is also important to analysis how to retain the limited labour force who are already in the sector.

In this research, we try to understand how employees and employers negotiate flexible work arrangement so that the employees can achieve a higher level of flexibility in the institutionalised care sector in China. The paper is based on participatory field research and in depth interviews in old age care homes in Beijing and Shanghai in 2016-2019. The authors develop a three level time management framework to analyse how care workers have acquired some level of flexibility. The last section summarizes the research findings and highlights the emerging adaptive labour relationship in China’s social care sector. Policy suggestions are made to better support care workers and reduce the turnover rate in nursing homes. This research contributes to the growing body of literature on the need to adopt new work arrangement in the elder care sector.

Title: Retirement eggs and retirement baskets

Speakers: Akshay Shanker and Isabella Dobrescu
Affiliation: UNSW Sydney, CEPAR

Abstract (please don’t cite without authors’ permission): How do people with different demographics, earning abilities and preferences save across asset classes such as housing, financial and pension wealth during their life? Are these different asset classes serving different saving motives, such as self-insuring against idiosyncratic earnings shocks, building retirement savings or gaining market returns? And how does a government policy imposing considerable pension savings affect these decisions? We address these questions in a dynamic life-cycle model and examine the saving behaviour of members of an industry-wide pension fund to assess the impact of age, gender, earnings dynamics, pension plan defaults, preference heterogeneity and credit constraints on wealth accumulation.

We estimate the model using the simulated method of moments on matched national survey and administrative data from a large Australian pension fund. Our preliminary results show considerable differences in what drives saving in each asset class across gender and age. Interestingly, men use financial wealth primarily as a means to self-insure against labor income shocks, while women also use it to save for retirement. Second, women appear to rely on housing wealth to a far lesser extent than men for the purpose of self-insurance. Third, more flexible pension choices would considerably tilt women's choices towards higher retirement savings via their pension plan but also in illiquid wealth. Finally, men use both financial and housing assets to manage preference shocks, while their role is limited for women.

The seminar will also discuss a new solution method, which utilises sufficiency of a sub-derivative generalisation of the Euler equation, to efficiently solve and estimate high dimensional dynamic models with non-convexities on compute clusters.

Title: Willingness to take financial risks and insurance holdings: A European survey

Speaker: Katja Hanewald
Affiliation: UNSW Sydney, CEPAR

Research by Martin Eling, Omid Ghavibazoo, and Katja Hanewald
Abstract: We investigate the relationship between self-reported willingness to take financial risks and ownership of life insurance and long-term care insurance. For a representative sample of individuals aged 50+ from 14 countries and controlling for demographic and socioeconomic determinants of insurance demand, we find a positive link between willingness to take financial risks and ownership of both long-term care insurance and life insurance. The link is stronger for whole life insurance compared to term life insurance and long-term care insurance. Two robustness tests that (i) use risky asset ownership instead of willingness to take financial risks and (ii) focus on specific demographic and socioeconomic groups confirm the results for life insurance, while the results for long-term care insurance are less clear. Our empirical results cannot be explained by the classical expected utility framework and thus support recent research indicating that alternative models (e.g., prospect theory) are needed to explain insurance demand.

Title: Socioeconomic position and healthy ageing: a systematic review of cross-sectional and longitudinal studies

Speaker: Saman Khalatbari-Soltani
Affiliation: University of Sydney, CEPAR

Abstract: Heterogeneity in health and function in older age is strongly affected by an individual’s socioeconomic position (SEP). While systematic reviews of published evidence have supported the association between SEP and selected components of healthy ageing (e.g. physical and cognitive functioning) or self-reported health, the association between SEP and healthy ageing as a multidimensional construct is unclear. We conducted a systematic review of cross-sectional and longitudinal studies on the associations between SEP and multidimensional healthy ageing measures. Thirty-nine articles met inclusion criteria (23 cross-sectional and 16 longitudinal studies). There was no consistency in operationalizing healthy ageing across studies, domains included in the healthy ageing measures, or the definition and number of levels of SEP indicators. Overall, regardless of heterogeneity between studies, we confirm the existence of a strong association between educational level and healthy ageing. We also observed an association between income/wealth and healthy ageing mostly from the cross-sectional studies; while there are fewer studies, the same trend seems apparent from longitudinal studies. The number of studies including occupational position, homeownership, parenteral SEP, or composite SEP was insufficient to draw a conclusion. These findings, and the broader evidence base on SEP and healthy ageing, highlight the importance of addressing inequality through integrated health and social policies and strategies.

Title: The impact of mortgage brokers on borrowers' preferences and perceptions

Speaker: Sol Chung
Affiliation: University of Sydney Business School, CEPAR

Abstract: Complex financial products such as home mortgages have many features and are offered in staggering variety, leading many households to turn to brokers for assistance with their choice of loan, lender and repayment plan. In this study we use stated preference methods - a best-worst task and discrete choice experiment - to build a deeper understanding of how perceptions of mortgage attributes (subjective ratings of confusion and importance) influence borrowers' valuation of mortgage attributes and how those valuations vary when borrowers have consulted brokers. Analysis of best-worst responses show that most borrowers are highly confused about some common contract features - maximum loan-to-value ratio, compulsory lender's mortgage insurance and loan portability - but consider the level of interest rate, the ability to make extra repayments and ARM/FRM as the most important attributes. However, borrowers who have consulted brokers express generally less confusion and consider a wider range of attributes in their deliberations. Estimates from a hierarchical mixed logit model show that, compared to borrowers who have no experience of using brokers, older broker-advised borrowers place value on avoiding high establishment fees, and younger and more educated broker-advised borrowers are more likely to accept longer loan terms and have a low preference for principal and interest payment schedule and the flexibility of early repayments.

Title: A History of the Taxation of Retirement Incomes in Australia

Speaker: Paul Tilley
Affiliation: Tax and Transfer Policy Institute, Australian National University

Abstract: This seminar explores Australia’s tax reform history – from Federation, to the impact of the two world wars, to the major tax reforms of 1985 and 2000 and the more fraught efforts of the past two decades. It will assess both the political economy issues of policy making and the quality of the tax reforms that have been achieved in Australia. The seminar will focus particularly on the history of changes in the taxation of retirement incomes, including Australia’s unique experience with superannuation.

Title: I Can See Super Balances of Dead People

Speaker: Ross Clare
Affiliation: ASFA

Abstract: The Retirement Income Review Report stated that retirees tend to consume only the income derived from assets and not the assets themselves.

However, my analysis suggests that this is not the case. In a number of studies there is considerable survivorship bias, with those still alive and still with superannuation dominating the data that has been analysed. Fortunately, there are data sources available which provide a definite answer in regard to whether or not retirees generally draw down on their capital held in superannuation in retirement.

My presentation makes use of publicly available Australian Taxation Office (ATO) data on Australians with superannuation. It also makes use of comprehensive information from the longitudinal survey of Australian households, the Household, Income and Labour Dynamics in Australia (HILDA) Survey.

The median age of death for men is 78 and for women it is 84. By those ages, the vast majority of retirees have reduced their superannuation balance to zero. The main group having the same amount of superannuation when they died as when they retired are those who retired with no superannuation. However, a very small proportion still have a substantial superannuation balance at death and that inflates averages.

ATO data confirm that current superannuation balances for those aged 70 and over are, in most cases, quite modest with a large majority having no superannuation. The 1.02 million individuals with superannuation equate to 37.8 per cent of the ABS estimate of 2.7 million of Australians aged 70 and over. Around 1.7 million Australians aged 70 and over have no superannuation or, in other words, over 60 per cent of those aged 70 and over have no super.

For the minority group of those aged 70 and over with superannuation, the median balance falls within the $100,000 to $149,000 range. Only around 185,000 individuals had a superannuation balance of $500,000 or more, with 27,325 individuals (around 1 per cent of those aged 70 and over) having more than $2 million in superannuation. The ATO data clearly show that the percentage of individuals with superannuation declines substantially with age as individuals withdraw all of their superannuation.

These ATO statistics are consistent with the HILDA data. They indicate that for the great bulk of those of typical retirement age, superannuation balances are nil or are at a very modest level. Only a very small proportion have substantial balances at any stage after age 70.

HILDA data show that 80 per cent of people aged 60 and over who died in the period 2014 to 2018 had no super at all in the period of up to four years before their death. For those aged 80 plus, over 90 per cent had no super in the four-year period before their death. For those individuals aged 80 and above, only 5 per cent had more than $110,000 in superannuation in the period of up to four years before their death.

In the case of those who died aged 60 to 69, less than half had any super at all. This figure is especially low as around 25 per cent of this group had been employed in the period of up to four years before they died.

Men are more likely to have superannuation than women in the four years before death. For those who died in the period 2014 to 2018, only 15 per cent of females aged 60 plus at death had any superannuation compared to around 25 per cent of men.

Given that a large proportion of current retirees have very modest superannuation balances, the case is strengthened for increasing the Superannuation Guarantee (SG) to 12 per cent (as currently legislated) so that retirees can live in retirement with dignity. There is a small proportion of retirees who have superannuation balances greater than can be reasonably justified given the tax advantages provided to superannuation. ASFA has recommended that individuals be required to withdraw any superannuation they have in excess of $5 million.

Title: Pension Systems in the Developing World: Current Challenges and Future Directions

Speaker: Seda Peksevim
Affiliation: Bogazici University

Abstract: Today, people’s greatest financial concern is no longer paying their short-term bills or credit-card debt. According to the new study by Zurich Insurance Group and the University of Oxford (2019), ‘retirement security is the top financial worry’ for workers in 14 out of 16 countries. Likewise, recent surveys on old-age income suggest that nearly half of the respondents from different parts of the world do not feel secure about having a comfortable retirement (AARP Foundation, 2018; Credit Suisse, 2020).

While a lack of retirement savings has turned out to be a global phenomenon, most studies cover the design of pension systems in developed countries, which face relatively few challenges compared to developing ones. Moreover, from a handful of papers on developing regions, there is a tendency to discuss pension-related issues in the context of specific countries or topics. To this end, this study aims to provide an overall and detailed picture of the public and private pension systems in the developing world, including the present challenges and future directions.

The first part of the paper presents an overview of public pensions in developing countries. It illustrates the impact of aging on sustainability and the adequacy of pay-as-you-go plans, along with some suggestions for the future of state pensions. In the second part, the paper focuses on private pension systems in the developing world and discusses the reasons for low pension savings with respect to the issues of coverage, contribution, and investment performance. This section also concludes by proposing certain recommendations for private pensions in the light of financial as well as behavioral and technological developments.

Title: How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme

Speaker: Ha Vu
Affiliation: Deakin University

Abstract: Concerns over the adequacy of low and middle-income earner contributions to retirement plans have led governments to introduce targeted matching schemes. In this study, we examine the effects of an Australian scheme using administrative tax-filer data, exploiting longitudinal changes in eligibility and match rates. We find small increases in the proportion who contribute, concentrated amongst those without recent contributions and those with greater means, but lower average contributions because the matching payments displace contributions of high contributors (negative income effects). These findings point to the importance of credit constraints for this group and question the effectiveness of targeted matching schemes.

Title: Is there empirical evidence of industry superannuation funds adopting tax strategies?

Speaker: Thulaisi Sivapalan
Affiliation: UTS

Abstract: The objective of this research is to evaluate empirically whether industry superannuation funds adopt aggressive tax strategies to minimize the incidence of taxation. Industry superannuation funds are economically significant with assets more than $717billion, and projections suggest a growth trajectory that may eclipse the competing participants in the 2.7 trillion superannuation industry. Notably, the tax payments made by superannuation funds are a material source of tax receipts for the Australian Federal Government. These concerns are amplified in the current economic climate where governments face competing objectives of stimulating the economy and concurrently being fiscally responsible while enduring a significant reduction in tax receipts. The research finds no empirical evidence of industry funds adopting aggressive tax strategies. Furthermore, while there is variation in tax rates across funds, there is no evidence that this is associated with factors traditionally linked with the adoption of aggressive tax strategies. This study is the first to empirically capture the effective tax rates of superannuation funds using hand collected unabridged audited financial statements. The findings are significant as contexts with low tax rates are
given scant considerations in the extant literature and it suggests that with tax rates below 10% the benefits of tax aggressiveness (i.e., the excess of benefits over costs) are limited. This is relevant to the literature considering the incentives for tax aggressiveness generally. We also take advantage of this context to evaluate the appropriateness of alternate measures of corporate tax avoidance. Of particular concern is the cash effective tax rate, and we identify issues with this measure where there is growth and/ or variability in income, with this resulting in biased measures of tax aggressiveness.

Title: Cognitive Aging, Misperception, and Health Management

Speaker: Xi Chen
Affiliation: Yale University

Abstract: Population aging elevates burden of chronic diseases and risk of costly financial decision errors. Effective decision management can be cognitively demanding and may require additional supports. We first synthesize the literature on cognitive decline and financial decision making. Using nationally representative longitudinal data from China and the United States, we offer novel evidence on 1) the effect of cognitive impairment (CI) on health management; 2) how cognitive misperception may further exacerbate poor health management; and 3) the role of long-term care services and supports (LTSS) on health management in different stages of CI.

Direct enquiries to:  Gaoyun (Sophie) Yan 

* Note: The safety and wellbeing of participants is paramount to CEPAR. CEPAR acknowledges the ever-changing COVID-19 situation has created uncertainty, also in terms of future travel, both interstate and overseas. Subject to the COVID-19 caveat with regard to government and university restirctions, seminars take place with a mix of in-person and online participation in a COVIDsafe environment, however, if circumstances restrict this CEPAR will convert to an online event entirely. All registered participants will be notified in this case.

Monday, November 22, 2021 - 15:00
End date: 
Monday, November 22, 2021 - 16:30