The Australian retirement income system has a number of features that are unique, relying on compulsory contributions, choice and extensive outsourcing. Ron and Nicholas will undertake separate critical analysis of this system, providing valuable insights for those designing and implementing similar systems around the world. Ron will first concentrate on the compulsory nature of the scheme, and the tax subsidies that it provides. He will show that it results in billions of dollars being transferred from the poor to the rich, and the detrimental impact that it is having on home ownership. He will then turn to the largest and somewhat unique feature of the system, self-managed superannuation funds, and will show that these put the investments in the hands of those who would appear to be worst-placed to manage them.
Nicholas will present empirical estimates, taken from his recently published book on the subject, which suggest that over the last twenty years, the Australian superannuation industry has delivered some A$700-900 billion less return for its members than it could have if the compulsory contributions had simply been invested in a passively-managed balanced fund. He will outline the problems which have led to this outcome, including a history of incoherent policy processes; fees and charges which are high by international standards; how outsourcing and multiple funds per member have increased costs and reduced focus; and how complexity often creates a large degree of separation between members and those who manage their funds. He will also explain how, in Australia, legal, regulatory and governance systems appear to have been inadequate to curtail rent-seeking behaviour by advisers and managers.
Both Ron and Nick have ideas about how to fix these many problems, which will be discussed during Q&A.