The Australian Annuity Market
In Australia, a means-tested old-age public pension is paid from general tax revenues. A full pension (equivalent to roughly a quarter of the average wage) is currently paid to more than half the aged population, and a reduced pension is paid to an...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/11/717422/australian-annuity-market http://hdl.handle.net/10986/19769 |
| Summary: | In Australia, a means-tested old-age
public pension is paid from general tax revenues. A full
pension (equivalent to roughly a quarter of the average
wage) is currently paid to more than half the aged
population, and a reduced pension is paid to another quarter
of the aged population. About 20 percent receive no old-age
public pension because of the level of their income or
assets. There is also a compulsory system under which
employers contribute at least 7 percent of salaries into a
superannuation plan for the vast majority of employees.
(This minimum rate will gradually rise to 9 percent in
2002.) More than 80 percent of superannuation benefits are
received as lump sums; when public sector employees are
excluded, the figure rises to almost 90 percent. The market
for private life annuities with longevity insurance is very
small. Greater use is made of allocated annuities, which are
similar to income drawdowns in the United Kingdom or
scheduled withdrawals in Latin American countries. The value
of life annuities, measured by the money's worth ratio,
compares favorably with that of annuities available in the
United Kingdom and United States. But these ratios are
calculated on the basis of conservative government bond
yields. Many investors prefer allocated annuities--which are
perceived to offer considerable advantages in flexibility
and higher potential returns--despite the absence of
longevity insurance. |
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