Leveraged superannuation |
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Authors: | Peter Dunn Scott Francis Jason Hall |
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Affiliation: | 1. PricewaterhouseCoopers, Brisbane, 4000, Australia;2. UQ Business School, University of Queensland, Brisbane, 4072, Australia |
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Abstract: | Rules governing superannuation investments are made with respect to investment‐specific risks, rather than overall portfolio risks. In particular, legislation prohibits borrowing except in specific circumstances and on a non‐recourse basis. We model the distribution of leveraged portfolio outcomes for a representative investor, accounting for their age‐earnings profile, differing taxation of dividends, capital gains and franking credits, and the volatility of equity returns and interest rates. With explicit portfolio modelling, there is no need to categorize specific investments as ‘too risky’ on a stand‐alone basis. We show that leverage is likely to enhance retirement outcomes for investors with low risk aversion. |
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Keywords: | Leverage Investment Superannuation Taxation Volatility G11 G18 G23 |
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