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Choices and Constraints over Retirement Income Streams: Comparing Rules and Regulations *
Author(s) -
BATEMAN HAZEL,
THORP SUSAN
Publication year - 2008
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2008.00480.x
Subject(s) - drawdown (hydrology) , rule of thumb , compromise , welfare , economics , simplicity , actuarial science , variance (accounting) , simple (philosophy) , microeconomics , public economics , computer science , engineering , accounting , law , philosophy , geotechnical engineering , epistemology , algorithm , aquifer , political science , groundwater , market economy
The new Simplified Superannuation regulations for Australian superannuation provide tax concessions to retirement income streams which comply with legislated minimum drawdown rules. We evaluate these new drawdown rules against four alternatives, including three formula‐based ‘rules of thumb’ used by financial planners. We find that the new regulations are a substantial improvement on the previous rules for allocated pensions and, when compared with the formula‐based rules, are a good compromise in terms of simplicity, adequacy and risk. We also find that welfare is lower for most individuals who follow the Simplified Superannuation rules compared with welfare under an optimal path or a simple fixed percentage drawdown rule, but that outcomes could be improved through a further simplification of the new rules.