6 Conclusions
The HSS provides an opportunity to examine the retirement accumulations of those who report having superannuation schemes, either workplace or personal schemes. Workplace schemes are defined in the HSS as those involving an employer contribution. For those who had joined a workplace some time ago, it is possible that membership was compulsory. However that is no longer typically the case.
For both individuals and couples, it appears that those who belong to a workplace superannuation scheme have a considerably higher level of net worth. However, for personal schemes, the difference in net worth between holders and non-holders becomes statistically insignificant once such socio-economic variables as age, gender, education, region of residence, income, main source of income, and so on have been accounted for.
A formal test was made of the relationship between the value of holdings in a superannuation scheme and the value of net worth in other forms of saving. It is possible that where a person has chosen to participate in a workplace scheme, they would regard their saving in this scheme as a substitute for other forms of saving. In fact, in the limit, there could be perfect substitution, whereby for every additional dollar held in the workplace scheme, one less dollar would be held in other vehicles. A less extreme case could involve partial substitution, and finally there might be complementarity. In this latter case, the individual would hold more in other vehicles as well as increased holdings in a workplace scheme.
In every case examined, for both workplace and personal schemes, we can reject the hypothesis of perfect substitution. In the only case where the results suggested partial substitution, the effect was typically small in absolute value and not statistically different from zero.
Finally for most cases we found significant complementarity. Regardless of gender and partnering status, individuals held more in other vehicles when they contributed to personal schemes. The corresponding effect is a little weaker, yet still significant, for workplace schemes. For both types of schemes, the effect was much stronger for partnered females than for partnered males and for unpartnered than for partnered individuals.
When these proportional changes are translated into dollar amounts, the results are impressive. An additional $1 in a workplace scheme is associated with a higher total net wealth accumulation of $1.74 for unpartnered females and $2.10 for unpartnered males. For couples the effect is $1.47. In the case of personal schemes the corresponding values are $3.00 for unpartnered females, $5.33 for unpartnered males and $2.00 for couples.
In summary, there is evidence that those enrolled in workplace or personal schemes do have higher net worth than those not in such schemes. However, it must be stressed that the effects are not estimated with any great precision. They have wide margins associated with them, reflecting considerable variability in the underlying sample. In addition, we find no evidence of any substitution away from other forms of saving when an individual enrols in a workplace or personal scheme. For both types of scheme, there is evidence that people in fact have higher wealth in other forms, indicating complementarity rather than substitution.
This study has been based on observed wealth accumulation at a single point in time. This does not allow us to trace the lifetime patterns of earnings, consumption and saving of particular age cohorts. It is possible for example, that decisions by older individuals about labour force participation and retirement might well be influenced by their wealth accumulation in superannuation schemes. If that were the case their lifetime earnings and savings might differ from those not in superannuation schemes.
It is possible that some people who were in a scheme in the past may have had the opportunity to withdraw either through resignation or moving to a fully cashed up remuneration package. Whether or not they reinvested the accumulations or spent them cannot be determined from the information contained in the HSS.
The principal caveat that should be borne in mind when interpreting the results of this study is that those who have voluntarily chosen to belong to a scheme might not necessarily have the same characteristics as the population as a whole. They could be drawn from a sub-population of those who have a greater propensity to save. It is true that the results have accounted for the influence of wide range of other factors (including age, ethnicity, migrant status, region, income and main source of income). It might be reasonably argued that these factors have controlled for at least some of the selection bias, so that the results do indicate a genuine influence on total net worth arising from the use of superannuation schemes. However the possibility that there are other unobserved characteristics of people (such as their attitude to risk or their preference for consumption now rather than in the future) for which we have not accounted, cannot be ruled out.
If this were the explanation for why we observe those with superannuation schemes having higher net worth in total, then it is not clear that there any immediate policy implications to draw.
In contrast, if the fact of having joined a workplace scheme results in a “recognition” or “heightened awareness” of the need for saving, then arguably policies which promote voluntary enrolment in workplace schemes by providing information, reducing the costs of joining and removing any barriers might well foster increased retirement accumulation in total. The evidence does suggest this outcome is entirely possible.
