Restoring a Level Playing Field for Defined Benefits Superannuation

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Since the late 1980s defined benefits has declined around the world. By June 2012 defined benefit balances in Australia stood at just 21 per cent of accumulation ones. The defined benefits alternative will never recover its previous dominance here because they can only be offered by large and stable organisations: since 1992 Australia has had superannuation that is compulsory and (mostly) privately managed. Accumulation plans are the only viable ones for SMEs. Yet several policy measures have unduly weakened defined benefits, especially in the private sector. Rescinding these measures would revitalise defined benefits. A byproduct would be a deeper market for privately-managed lifetime annuities.

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This paper was presented in July 2013 at the 18th Melbourne Money and Finance Conference (MMFC), which explored the theme Financial Sector Evolution – Prospect and Determinants.

For more papers presented in the conference, please click here.