What can we learn from the Australian retirement income system?

What can we learn from the Australian retirement income system?

Wednesday, 23 May 2018 - 12:30pm
Venue: 
Seminar Room, European Studies Centre, 70 Woodstock Road, Oxford OX2 6HR
Speaker(s): 
Ron Bird (University of Technology Sydney)
Nicholas Morris (University of New South Wales)
Chair: 
Charles Enoch (St Antony’s College, Oxford)
Convenor: 
Charles Enoch (St Antony’s College, Oxford)
Series: 
Political Economy of Financial Markets (PEFM)

Abstract:
The Australian retirement income system has a number of features that are unique, relying on compulsory contributions, choice and extensive outsourcing. Ron and Nicholas will undertake separate critical analysis of this system, providing valuable insights for those designing and implementing similar systems around the world. Ron will first concentrate on the compulsory nature of the scheme, and the tax subsidies that it provides. He will show that it results in billions of dollars being transferred from the poor to the rich, and the detrimental impact that it is having on home ownership. He will then turn to the largest and somewhat unique feature of the system, self-managed superannuation funds, and will show that these put the investments in the hands of those who would appear to be worst-placed to manage them.

Nicholas will present empirical estimates, taken from his recently published book on the subject, which suggest that over the last twenty years, the Australian superannuation industry has delivered some A$700-900 billion less return for its members than it could have if the compulsory contributions had simply been invested in a passively-managed balanced fund. He will outline the problems which have led to this outcome, including a history of incoherent policy processes; fees and charges which are high by international standards; how outsourcing and multiple funds per member have increased costs and reduced focus; and how complexity often creates a large degree of separation between members and those who manage their funds. He will also explain how, in Australia, legal, regulatory and governance systems appear to have been inadequate to curtail rent-seeking behaviour by advisers and managers.

Both Ron and Nick have ideas about how to fix these many problems, which will be discussed during Q&A.

Ron Bird is the Director of the Paul Woolley Centre at UTS which has recently transitioned to the Investment Management Research (IMR) Program. In 2011, he also took up a Chair in Finance in the Waikato Management School (Hamilton, New Zealand), and more recently he has conducted several projects for organizations in the financial services sector and played a key role in the establishment of two new funds management firms. Ron’s main research interests are in the economics of the funds management and superannuation industries and also various topics in the area of corporate social responsibility.

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.