Khemka, G., Tang, Y. and Warren, G.J., 2021, Accounting and Finance, 61(3), 4435- 4474.
We deploy a stochastic life-cycle model to examine how the superannuation guarantee (SG) impacts on welfare for Australian superannuation fund members under a reference-dependent utility function that evaluates consumption relative to target, allowing for existing superannuation, taxation and Age Pension eligibility rules. The analysis highlights how the optimal SG can vary substantially with pre-retirement income, the post-retirement consumption target and various other assumptions. We conclude that no single SG rate is appropriate for all members and suggest that the main reason for increasing the SG above 9.5 percent would be an aim of replacing the Age Pension where possible.