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When the pension rollovers hit? Why some workers’ pensions will be more valuable than others

There is a growing body of evidence suggesting that the rollover of workers’ pension funds can actually have a more lasting effect on their wealth than the average worker’s savings.

In a paper for the Australian Institute of Business, Professor Tim O’Connor and Dr Peter Daley from the University of Sydney looked at data on the average wealth of pensioners between the ages of 50 and 65, as well as a sample of workers aged over 75.

They found that in a period of time, the average pensioner’s retirement savings grew by just over 5 per cent over a decade, compared with a 1 per cent increase for those aged 55 and above.

This increased wealth was more likely to be concentrated in the higher-earning pensioners, with those in the middle and lower incomes the hardest hit.

“Wealth inequality can have a lasting impact on an individual’s retirement security, as individuals can expect to experience higher rates of financial hardship as a result of their pension, and lower income if they have to wait for their pension to rollover,” Professor O’Connor and Dr Daley wrote.

The authors argue that the accumulation of financial assets, and the potential for those assets to become less valuable as a consequence, makes it more important for workers to hold onto their pension wealth.””

However, the lower income earners’ median net worth declines by more than 3 per cent, from $70,000 at retirement to just over $40,000 now.”

The authors argue that the accumulation of financial assets, and the potential for those assets to become less valuable as a consequence, makes it more important for workers to hold onto their pension wealth.

The authors also looked at the impact of rollover on the distribution of wealth. “

If the average person is able to save well, their retirement will be relatively stable.”

The authors also looked at the impact of rollover on the distribution of wealth.

They were interested in how the pension value of workers who had started their career before the rollovers took place varied across different income groups.

For example, in a sample that had been rolling over for three years, the median pensioner in the lower middle income bracket saw their wealth fall by almost $2,000, while the median wage earner lost nearly $1,000 in value.

For those in higher income brackets, the decline in pension value was just 1 per for $4,000 of annual income.

“The increase in wealth in the bottom half of the income distribution, compared to the middle, may be associated with lower levels of financial wealth, which is less beneficial for those in lower income brackets,” the authors write.

“While the decline may be small, the increase in the wealth in that lower half of households is associated with the greater increase in their financial well-being, which may explain why the lower and middle incomes have the lowest average financial wealth of all.”

The paper also looked to see how pensioners who had made large contributions towards their retirement fund at retirement had fared, with some pensioners paying more than they expected.

“A large number of retirees may have contributed to their pension fund over the course of their retirement, but for the majority of them, their pension contribution was significantly lower than their income, leading to a large drop in the value they received,” the paper said.

“For example, a retired employee who had a net income of $150,000 when they retired in 2016 could expect to receive $1.7 million in retirement income over the life of the pension.”

The researchers also looked into the impact rollovers had on the age structure of the population, and found that the more senior the pensioner, the higher their chance of being affected by the rollback.

For the lower earners, the drop in their pension value in their 50s was about 5 per year on average, while for those who retired in their 60s, it was about 3 per year.

For older pensioners in the upper income bracket, the risk of the rollbacks was about twice as high.

The paper found that when pensioners had had their rollovers, the amount of money they had saved in their retirement was greater than their expected retirement income.

But for the younger pensioners that had not rolled over, the rollout did not significantly affect their expected pension income.

“There is a lot of evidence that older pensiones have better financial security than younger pensioner cohorts.

This could explain why pensioners with higher income are less affected by rollovers,” the researchers conclude.

While the study did not take a position on whether the rollouts should be rolled back in future, it did find some evidence that they were having an impact on the value the pensioners were receiving, as the older they were, the more they were expected to receive in retirement.

The paper is available on the Australian National University’s website.

Topics:economics-and-finance,workers,health-administration,people