The retention effects of high years of service cliff-vesting pension plans

- We study a major reform in the Australian military's retirement plan.
- A 20-year cliff-vesting plan is substituted by a new one-year vesting plan.
- Most observed individuals choose the one-year vesting retirement plan.
- Removing the 20-year cliff-vesting considerably increases attrition rates.

We study the retention effects of the Australian military's decision to remove a 20-year cliff-vesting requirement from their retirement system in 1991. We follow to the present individuals who self-selected into and out of the 20-year cliff-vesting plan, as well as those who were forced out of the plan. Eliminating the high years of service cliff-vesting provision leads to consistently higher attrition over time.