Facing the pensions challenge: Lessons from Australia

Facing the pensions challenge: Lessons from Australia

Monday, 1 May 2017 - 5:00pm
Venue: 
Old Common Room, Balliol College, Oxford
Speaker(s): 
Nicholas Morris (University of New South Wales, Sydney)
Chair: 
David Vines (Balliol College, Oxford)
Convenor: 
Adam Bennett (St Antony’s College, Oxford); David Vines (Balliol College, Oxford)
Series: 
Political Economy of Financial Markets (PEFM)

Abstract: A major long-term challenge facing modern economies is how to pay for the living expenses and care costs of the elderly. Universal state provision for pensions and long term care is now beyond the realistic capabilities of most countries. Australia recognised this some thirty years ago, and introduced compulsory ‘Superannuation Contributions’ in 1991. These, now 9.5% of earnings, are deducted from wages and salaries by employers. Since their introduction, funds in excess of A$2,000 billion (about £1,200 billion) have been accumulated in a mixture of public, industry, retail and self-managed funds. These assets are held in ‘Defined Contribution’ schemes, so that the risks of inappropriate funds management are borne entirely by the members. The management of these funds has not been a success. An unnecessarily complex and expensive industry has developed, supervised by multiple and overlapping agencies, and governed by trustees who provide inadequate oversight. The result has been a significant reduction in the funds available to support retirement, and a very large transfer of wealth from Australian fund members to those who own and run the industry. In this seminar, Nicholas will describe how the Australian system developed, quantify the funds shortfall; and compare the Australian system with international benchmarks. He will also draw out the lessons which the Australian experience provides for other countries – such the UK – as they shift towards greater reliance on personal Defined Contribution arrangements.

Nicholas Morris is an Adjunct Professor in the Faculty of Law at the University of New South Wales, Sydney. A Balliol graduate, he was Deputy Director of the Institute for Fiscal Studies in the 1980s. In the 1990s he was the CEO of London Economics, and then moved to Australia in 2000. At present he is mainly working on the coordination of the large programme of infrastructure investment that is being rolled out by the Indonesian government. Nicholas has researched and published widely on pensions and healthcare throughout his career, and in 2018 will publish a book detailing the failings of the Australian system.