Letter from the Managing Editor
aiCIO was fortunate to receive a warm November welcome
in Sydney, where we held our first Australian CIO Summit.
The country’s retirement industry—which consistently
attains top rankings among systems worldwide—is
impressive (and impressively large), and was thus a natural
evolution from our New York and London conferences.
Mercer’s latest global comparison of pension systems
demonstrated that while the Netherlands, Australia, and
Switzerland hold the top three spots in their ranking,
the retirement system of the United States is a lackluster
tenth. So, can the US learn from the Australian market—which is largely made up of
defined contribution accounts amalgamated and managed professionally? As well, will
the future of the retirement industry worldwide grow to mirror the Australian market of
The general consensus I received from investment consultants, fund managers,
and others in the industry at our event was a feeling of pride, humility, and dissatisfaction about their creation. While the Aussies are proud of the success they’ve achieved
with their Superannuation funds—reducing strains on the government’s balance sheets,
freeing up money for other areas such as health care and education, and serving as a
beacon for others to emulate—they still say there is opportunity to do much more.
The Australians realize that a purely defined benefit system is not practical. “The
concept of understanding the extent of liabilities is important, but the burden needs to
end up with individuals, which the defined contribution world allows,” the investing
head of one major Superfund told me. “Yet, we haven’t done a good enough job assessing
individual member needs and we’ve been too return-versus-peers focused. So, there are
concepts of both the DB and DC worlds that have merit.”
Australia’s Superannuation industry demonstrates a realistic understanding of
human nature and a sort of paternal mindset: since 1992, the government has instituted
a compulsory saving requirement—a percentage that continues to increase—because if
people are not forced to save, they won’t. Yet, while forced saving has been effective in the
Australian market, it also creates added problems, such as greater bureaucracy, industry
sources say. Australians are forced to save but most people don’t participate or care, so
money ends up going into default funds. A system known as MySuper has arisen from
that problem as a method of funneling default money into an investment option with
limited fees, so that people who aren’t paying close attention to their funds won’t be over-
charged for services they’re not using, Claire Aitchison, a senior research analyst at Plan
for Life—recently acquired by aiCIO’s parent company—told me.
Yet despite the problems that Australians voice regarding their pension system, it
is evident that their mandatory system appears pristine compared to the state of other
systems around the world: it requires robust retirement savings; it’s managed professionally, and with an eye toward cost savings and effective asset allocation; and it’s relatively
simple. All of these are attributes that America—and many other countries—could learn
from and emulate. If they fail to do so, I suspect that you’ll see a further divide between
those countries that succeed in retirement planning, and those that fail.
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Paula Vasan, Managing Editor, aiCIO
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