Australia’s Retirement System: Strengths, Weaknesses, and Reforms

The brief’s key findings are:

• Australia’s retirement system has two key components: a means-tested government benefit and a mandatory savings account financed by employers.

• The government benefit provides a basic income, and about three quarters of retirees qualify.

• The savings accounts require employer contributions of 9 percent of pay for each worker, rising to 12 percent by 2020, and workers choose how to invest.

• By making savings mandatory, Australia has solved the pension coverage problem, and the system will provide substantial benefits once it fully matures.

• Key concerns remain, such as incentives to spend down savings to get a higher government benefit and low levels of annuitization.