Alternative retirement income arrangements and lifetime income inequality:Lessons from Australia

This paper examines the implications for lifetime income equality of altern ative retirement income arrangements, using the Australian scheme as a benc hmark. In Australia, the pay-as-you go financed age pension is means-tested and thereby provides a contrast with those countries where part or all of a basic pension is paid to all aged persons. Many governments are consideri ng an increase in the level of means-testing. The results show that the int roduction of a universal pension coupled with significant changes and simpl ifications to the structure of taxation and superannuation have little effe ct on the redistributive impact of the tax structure in a life cycle framew ork. The presence of means-testing appears to have no significant effect on life-time inequality. The results suggest that it is possible to eliminate complexities from the system providing retirement benefits without having any deleterious effect on equity.