Australia's compulsory superannuation system, which was introduced 25 years ago, is working in its goal to encourage a generation of Australians to save for their retirement, according to Mr Colin Kelton, Managing Director of the investment management company, Vanguard Australia.
Launching Vanguard’s inaugural “How Australia Saves” report, Mr Kelton says that the compulsory super system in Australia is still maturing and expected to reach maturity in 2030, when the first generation of Australians to spend their whole working life with the compulsory super system reaches retirement age.
Australia has “one of the world’s largest and fastest growing private pension systems, with over A$2.1 trillion (US$1.6 trillion) in total assets as of June 2016, with a close to universal coverage of the entire adult working population of some 12 million people,” the report says.
It notes the system has been growing at one of the fastest rates of any developed economy pension system, with a compound annual growth rate of 7.9% for the 10 years to December 2016.
The report also notes the compulsory superannuation system means Australians are already increasingly relying on superannuation for their retirement income, compared with the traditional aged pension.
The study, of Sunsuper’s 1.1 million members, provided a snapshot of the behaviour of super fund members in Australia. It said that the vast majority of members made only the compulsory 9.5% superannuation guarantee contributions and did not put any extra into super.
Australia's retirement savings system has three components – a taxpayer-funded age pension, compulsory super and voluntary contributions. Older workers have only had the benefit of compulsory super since 1992 with low contribution rates for most of the time. That means most older workers will have a high reliance on the age pension in retirement for a long time to come.