Australia’s retirement system has a much higher asset growth rate than other industrial nations. It also spends less on old-age pensions and has high individual savings rates.
According to a report by Julie Agnew for the Center for Retirement Research at Boston College, the U.S. could learn a few lessons from Australia’s system, which combines mandated individual savings and a means-tested government pension.
In her research, Agnew found that plan participants often accept their plan’s default investment option, and while both the U.S. and Australia have introduced guidelines for default investment allocations, Australia’s greater emphasis on defaults should ensure that their guidelines have a more far-reaching impact.
Australia also is actively promoting the availability of advice, using standardized information on risks and fees and an expansion of “simple advice,” and has imposed a fiduciary mandate on those who advise plan participants.
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Australia also requires its employers to make contributions to participant retirement accounts, so it has achieved nearly full pension coverage of all of its workers.