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Reflections of the Australia retirement system Steve Utkus

Reflections of the Australia retirement system Steve Utkus Principal, Vanguard Center for Retirement Research September 17, 2013. What if Congress…?. Repealed the Social Security system – and replaced it with a flat-dollar, means-tested benefit?

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Reflections of the Australia retirement system Steve Utkus

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  1. Reflections of the Australia retirement system Steve Utkus Principal, Vanguard Center for Retirement Research September 17, 2013

  2. What if Congress…? Repealed the Social Security system – and replaced it with a flat-dollar, means-tested benefit? Introduced a mandatory 12% contribution (by employer or employee) to a private savings plan? Ended ERISA and the employer-centric retirement system? And broadened the income tax base, raised the top rate to 45%, limited top-income retirement tax benefits, and introduced a VAT – all to pay for the above and universal health insurance Welcome to Australia!

  3. A lesson for US analysts Concerned with fiscal sustainability? You see a means-tested state pension and a large private, funded pension system. Concerned with universality and greater equity? You see universal coverage and compulsory employer-provided pensions. But the reality is more complex. It’s the system—not the pieces. Australia is a combination of market-centric and social democratic elements. So, absent a revolution in US retirement policy, what lessons might we learn from Australia? And what might we avoid?

  4. Lessons to consider Compulsory private savings What level of compulsion should exist—and in what form? Rise of the superfund as “pension bank” Is the US system too employer-centric? A much less leaky bucket Is the US DCIRA system too flexible?

  5. Lessons to avoid Default funds and market risk Should pre-retirees have 70% of assets in equities? Rising longevity risk (due to means-testing) Should retirees have little or no annuity income? Inattention to costs Shouldn’t a compulsory system be driving down costs faster?

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