10
We Must All Be Capitalists Now
The Strange Story of Compulsory
Superannuation in Australia
Adam Creighton
Australians dwell on their nation’s sporting triumphs, but few realize how
much their country punches above its weight in funds management. With
just 0.3 per cent of the world’s population, Australia had almost 7 per cent of
the pension assets in Organisation for Economic Co-operation and Develop-
ment (OECD) countries in 2014, a bigger share than any country bar the UK
and USA (OECD 2015). In stark contrast to arrangements in other developed
nations, where, in return for higher taxation, governments typically provide a
guaranteed retirement income linked to individuals’earnings, Australians’
incomes in retirement increasingly depend on the skill with which they
have grown their mandatory ‘superannuation’savings in their working
years. The reform linked the fortunes of ordinary people to national and global
investment markets, supercharging both Australians’financial assets and the
industry that manages them.
While eighteen of thirty-four OECD countries now have some form of
mandatory private saving scheme, these typically complement government-
funded, earnings-related schemes or provide‘defined benefits’to retirees,
where pension providers bear the investment risk. Apart from Mexico and
Chile, Australia is the only OECD nation where compulsory and privately
managed defined contribution (DC) accounts, beyond a means-testedflat-rate
pension, are the extent of government intervention in retirement incomes.^1
(^1) President G. W. Bush, a long-time supporter of individual private saving, failed to convince
Congress in 2005 to divert a share of Americans’social security contributions into personal private
savings accounts.