How could the superannuation co-contribution scheme be modified to engage younger and poorer people?
Thanks for your question, which I hopefully addressed in the session. Just to clarify, if the objective of the co-contribution scheme is to help support people in retirement to have a comfortable standard of living, my view is that it is more effective to do this through the Age Pension. Our study suggests I think that for poor people, they have more than enough to deal with in their day-to-day lives than to worry about the adequacy of their retirement savings. My view is that we shouldn’t worry about trying to incentivise them to save more. For young people, my view is a bit different. For the ones who have the capacity to save more, trying to make it clearer what the payoffs to saving are may help. People tend to heavily discount the future and making the future more relevant to ‘the now’ could help. This could be done through nudges to calculate for them what increasing their superannuation contributions by a small amount could mean for their future retirement. Having said that, this type of information intervention hasn’t been tested. We need more research.
Have you got insights into when education (VET/Higher ed) data might be added and what this will look like?
Thanks for your question. My understanding is that the data will include indicators for participation, course level and course measures of field of study (e.g. ASCED 1-digit) and measures of completion. At the moment the ATO is grappling with how to best measure completion. I think they don’t have this in their data, but intend to create proxies such as % of subjects modules/completed as well as retention up until expected course duration. They are also trialling measures of provider/university types e.g. private v. public, group of 8 and the rest. The constraint is the risk of re-identification of the provider/university.
What is the cost of access?
Thanks for your question. This is a difficult one to answer because it depends on a range of factors including the specification of the machine that you need, the number of computers you want to share, the number of users, and the software licenses required. This is a negotiation between the Researcher and ATO.
For the co-contribution policy, what are your recommendations to the government for future changes to this policy – such as age eligibility?
Thanks for your question. If the objective of the co-contribution scheme is to help support people in retirement to have a comfortable standard of living, my view is that it is more effective to do this through the Age Pension than in trying to try and make the eligibility criteria more targeted. You could argue that you could make the scheme better targeted by using household income and or average income over consecutive years or restricting to younger people. However, our study suggests that disadvantaged people have more than enough to deal with in their day-to-day lives than to worry about the adequacy of their retirement savings. My view is that we shouldn’t worry about trying to incentivise them to save more. Instead, we should aim to support poor people through the Age Pension. This may mean making it better targeted and increasing the payment rate.
Will you consider Negative Gearing tax implications in sensitivity analysis?
Thanks for your question. At the moment the data doesn’t include any information on home equity, but the interaction between superannuation and negative gearing arrangements is an important one. I’m hopeful that the ATO will be able to develop the data in this direction in the near future.
Do you know when matching to educational data will be available, and secondly can all research organisation access ALife?
Thanks for your question. My best estimate is early next year, although I know that the ATO has to go through a rigorous external risk assessment before they can release the data development, so it could be a bit later. I think at the moment universities and government agencies have agreements in place to use the data. It may be best to contact the ATO directly at alife@ato.gov.au.
Can you tie this quantitative study into qualitative data on what barriers the target groups face to making additional contributions? As that will really inform appropriate policy adjustments
Thanks for your question. I think you are right, we are leaving open the question of why people don’t respond, although we have suggestive evidence that it is possibly related to a lack of discretionary income. Targeted interviews would help with this. We are open to the idea of working with qualitative researchers to get at this issue.
Would it be right to say these super findings are consistent with the complexity of the tax treatment of super discouraging many from investing the time/money to understand how it benefits/disadvantages them unless they are approaching retirement?
Thanks for your question. I think it is fair to say that the complexity of the superannuation and tax systems may contribute to the lack of response, especially (as you say) in the years that are well ahead of retirement age. However, I think that the scheme is quite simple, even though the system may not be. So my hunch is that the lack of responses is due more to people just not having the discretionary income to contribute and also young people just not being engaged because they heavily discount retirement – they have more immediate needs, especially trying to save for a house deposit.
Can dividend income, interest income, and mortgage deductions be used to back out wealth information in ALife?
Thanks for your question. Yes, you absolutely right, we can impute wealth stocks based on income flows from different asset classes. We have done this and when we’re done we hope that it will become part of the ALife dataset. Of course, the only problem is that this won’t give us measures of home equity, which is a big deal in Australia.
When will demographic data from Medicare be available?
Thanks for your question. In short, I’m not sure. However, I know that it has been something that they have been working on for around 12 months and that they are testing it.
Information can really be important. Can we back out the use of fund advisors to explore the role of that source of information on policy engagement?
Thanks for your question. I agree with you that information can be very important. We don’t have any data on information provided by fund managers. That said, it would be a good idea to test whether there is differences in responses to the scheme by fund providers. While we don’t have any information in ALife that identifies individual fund managers, there is information on different types of providers (e.g. Industry funds, government funds, self-managed funds etc.). I think examining differences in responses by fund type is a good idea. I’ll try this.
Comment from audience: The key challenge to more young people contributions for middle income is the high effective tax rates with means-tested Age Pension.
I think I didn’t quite get the question in the session. I agree that the high effective tax rates and mean-testing of the pension can limit voluntary contributions to super. We are planning on examining the impacts of pension age increases and changes in the single pension base rate to examine impacts on super contributions. Ideally we’d do this by linking ALife to administrative welfare data, but we may need to rely on HILDA data instead. The idea of examining the relationship between effective tax rates and contributions is a good suggestion, we’ll look into it.
Are there differences in responses to contributions by source of income (i.e. workers, self-employed)? And, is there any difference between the Australian states?
Thanks for your question. Differences in contributions between self-employed and PAYG employees is a good idea.
In other settings, we have seen quite different responses to superannuation changes. We will definitely try this.
Not sure what we would find by examining differences across states. Generally speaking, superannuation and taxation issues is the jurisdiction of the federal government. Nonetheless, testing for differences across states can’t hurt.