How does Australia’s superannuation system compare with the rest of the world?
Is Australia’s superannuation system working? According to a new report from Vanguard Australia, our system is “quite impressive” and will only get better.
The inaugural report, How Australia Saves, revealed a distinct difference to how the US saves for retirement.
The main advantage Australia has over the US system is that ours is a compulsory savings system. In the US, it’s up to individuals to save extra for retirement either via 401(k) plans or individual retirement accounts.
“This report will tell you that the system in Australia is working,” said Vanguard Australia’s Managing Director Colin Kelton.
“We spend a lot of time in the US just convincing people to save.
“Here you have the 9.5 per cent compulsory contributions.
“In the US, 40 per cent of the population don’t actually give (extra contributions to saving for retirement).
“Only 60 per cent of Americans actually put money away for their retirement.”
Mr Kelton would not comment on tax concessions for super, but added that Australia’s retirement savings system was “quite impressive” and, considering it still hasn’t reached maturity, that’s quite the compliment.
Australia’s super system will finally mature in 2030, when a generation of Australians will have spent their entire working life with the compulsory super system into retirement age.
The report also noted that we have ‘one of the world’s largest and fastest growing private pension systems, with over $2.1 trillion in total assets as of June 2016, and close to universal coverage of the entire adult working population of some 12 million people’.
It also revealed a compound annual growth rate of 7.9 per cent for the past decade – making it one of the fastest growing systems in the world.
Mr Kelton also said future reports will document any effects the 1 July super changes will have on the system and will aid the design of superannuation products.
“There are a lot of changes to super to come in the next year or two,” said Mr Kelton.
“As we release this report, year on year, we should see the impact of those changes.”
Do you agree that Australia’s superannuation system is working?