Intergenerational Dependences and the Financialisation of Retirement: Lessons from Australia

Across the developed world, population ageing has coincided with rising living standards and expectations in retirement. Since the 1980s this has led to growing concern about the sustainability of public pension systems. Australia has been held up as an example of prudent fiscal management, as it looked to fund retirement incomes through compulsory private savings. This supplemented Australia’s flat-rate and means-tested public pension system, also supported by widespread home ownership. The shift to private pensions has made individual workers more reliant on lifetime savings and on benefits accrued through the tax system rather than direct benefits. We examine the intergenerational implications of this trend towards greater financialisation of retirement incomes by analysising cross sectional data from the Australian Bureau of Statistics. Given the significance of the Australian model to international debates, we discuss the potential long run international implications for inequality in retirement of this experience.