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A Brief Critical Review of Australia's Retirement Savings System

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Abstract

On the first day in a new job in Australia, an employee will be asked “in which bank will we deposit your salary?” and “in which fund will we deposit your retirement savings contributions?” Australian companies have (almost) entirely outsourced retirement savings. For better and worse, companies and other organizations have (almost) no interest in or responsibility for their workers’ retirement; moreover (almost) all retirement savings vehicles are defined contribution (aka accumulation). This is surprising for a country with bipartisan support for the benefits of government-funded social welfare programs, especially because the retirement policies were driven largely by the union movement. Mercer ranks Australia’s pension system as one of the world’s best. Its size and success make it a magnet, and a rainmaker, for financial services professionals. The system has become fraught with myriad choices, which few members take advantage of, but which drive up overhead costs. In this article we review the history of Australian pensions and current reforms, and we point out where we believe the system could better serve its many millions of members.

Suggested Citation

  • Jack Gray & Ron Bird, 2011. "A Brief Critical Review of Australia's Retirement Savings System," Published Paper Series 2011-4, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:ppaper:2011-4
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    Cited by:

    1. Georg Inderst, 2009. "Pension Fund Investment in Infrastructure," OECD Working Papers on Insurance and Private Pensions 32, OECD Publishing.
    2. Wei-Ting Pan, 2016. "The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 32, July-Dece.
    3. Georg Inderst & Raffaele Della Croce, 2013. "Pension Fund Investment in Infrastructure: A Comparison Between Australia and Canada," OECD Working Papers on Finance, Insurance and Private Pensions 32, OECD Publishing.
    4. Wei-Ting Pan, 2016. "The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2016.

    More about this item

    Keywords

    Australia retirement savings system; Australia pension system;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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