presented by stuart anderson & martin ly seniors and means test branch
Post on 19-Dec-2015
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TRANSCRIPT
Presented by
Stuart Anderson & Martin Ly
Seniors and Means Test Branch
Retirement incomes:An analysis of the take-up
ofincome streams by Age
Pensioners
Today’s presentation
• Purpose
• Scope
• Results and findings
• Conclusions
• What is an Income Stream?
Purpose
To analyse the characteristics of age pensioners who purchased income streams from 1 July 1984 to 30 June 2004.
What is an income stream?
An income stream is a financial product that pays a regular stream of income payments in exchange for a lump sum.
There are two types: pensions and annuities.
Social security treatment• Social security treatment depends on the income
stream’s characteristics.
– Asset test exempt (ATE) income streams
– Asset-tested income streams (long term)
– Asset-tested income streams (short term)
• The social security legislation groups income stream products into three main categories:
Scope 1
• Number of income streams, average purchase price, gender, age pensioner’s assessable assets, marital status, and whether the product was purchased from a small fund (eg SMSF or SAF).
The paper examines:
• Linear regression modelling of the relationships between average purchase prices and customer’s demographic, financial and other characteristics.
Scope 2
• Covers age pensioners paid by Centrelink. Does not include any pensioners paid by Department of Veterans’ Affairs.
• Does not include age pensioners who are no longer on age pension, or do not currently qualify.
Scope 3
• The current income stream categories were applied as though they existed throughout the time period to ensure consistency.
• Defined benefit income streams are excluded from the analysis.
Take-up of income streams between 1984-05 and 2003-04
0
5,000
10,000
15,000
20,000
25,000
1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03
ATE Products ATLT Products ATST Products
2. ALLOCATED PRODUCTS BECOME ASSET TESTED
1. ALLOCATED PRODUCTS GIVEN ATE STATUS
3. TREATMENT CHANGED ON 20/9/98
4. DROP IN TAKE-UP OF ALLOCATED PRODUCTS
Average age at purchase
Women Men Women Men1998-99 67 67 63 652003-04 71 70 66 67Change 4 3 3 2
YearATE Non-ATE
Comparison of purchase price
1998-99 59,442 66,025 78,055 90,979
Women Men Women Men
2003-04 94,247 95,765 95,011 105,380
Change 34,805 29,740 16,956 14,401
ATE Non-ATE
Multiple linear regression model
LogPurchamt = Intercept + β1*Totass + β2*Inctest + β3*Entryage + β4*Sqge + β5*Sex + β6*Marstatus + β7*HomeID + β8*SMSF + β9*ProType + β10*AgeGroup + β11*Case +β12*Totass*Entryage + β13* Totass*sex + β14*Totass*Marstatus + β15*Totass*HomeID + β16*Totass* SMSF + β17*Totass*ProType
Asstest = Total assessable assets
Inctest = Total assessable income Entryage = Age when income stream purchased
Marstaus = Marital status (couple, single or widowed)
Sex = Male and Female HomeID = Homeownership status (homeowner
or non-homeowner)
ProType = Income stream category (ATE or non-ATE)
Main independent variables
Predicted average purchase price for income streams purchased by
partnered individuals
Non-ATE 88,700 93,800
Homeowner Non-Homeowner
ATE 67,500 71,000
Conclusions
• Income streams are becoming increasingly popular with age pensioners.
• Expect that income streams will continue to grow in importance for retirees.
• Age pensioners are investing more money in income streams.
Comments and feedback
We would appreciate feedback. Please feel free to speak to us during the Colloquium or else contact us at:
• Stuart Anderson – Email: [email protected]
– Phone: 02 6244 8605
• Martin Ly– Email: [email protected]
– Phone: 02 6244 6224