LIVING STANDARDS IN RETIREMENT: ACCEPTED INTERNATIONAL COMPARISONS ARE MISLEADING – A REVISED VIEW BASED ON GERMAN AND AUSTRALIAN WEALTH DATA

Accepted international assessments of living standards in retirement rely on comparisons of pension incomes (OECD, 2005). These assessments conclude that European countries with long standing contributory national pension schemes, which relate retirement incomes to previous earned incomes, provide retirees with much higher living standards than liberal Anglo countries in which many citizens rely on flat-rate old age pensions. The OECD, in particular, is critical of the low replacement rates (ratio of retirement to working income) and low ‘adequacy ’ of retirement incomes in the liberal Anglo democracies. Comparisons based on pension incomes are potentially misleading because the living standards of retirees depend on their total economic resources, and particularly their total wealth (net worth), not just on pension incomes. The political economies of different countries, especially their tax and pension regimes, offer quite different opportunities for wealth accumulation. Other things equal, high contributions to national pension schemes impose significant opportunity costs. They reduce opportunities to accumulate wealth via home ownership and household savings