How effective are Matching Schemes in enticing low-income earners to save more for retirement? Evidence from a national scheme

Melbourne Institute Working Paper No. 27/20

Date: December 2020


Marc Chan
Cain Polidano
Ha Vu
Roger Wilkins
Andrew Carter
Hang To


Concerns over the adequacy of retirement income of low and middle-income earners have led governments to introduce targeted matching schemes to incentivise contributions to private pensions. In this study, we estimate the impacts of a simple Australian scheme, using administrative tax-filer data and exploiting longitudinal changes in eligibility and matching rates. We find modest increases in the proportion of people making contributions, but reductions in average contributions due to dominant negative income effects. We also find stronger income effects among people with low permanent income, possibly reflecting liquidity constraints. Finally, we find asymmetry in the magnitude of responses to changes in the matching entitlement, with decreases eliciting stronger responses than increases. Taken together, our findings cast doubt on the effectiveness of targeted matching schemes to lift retirement savings.

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