A Super System

Photo by Matt Kalinowski

I recently spent a week at our Institutional Shareholder Services offices in Sydney, meeting team members of our four Australia media brands: Financial Standard, FS Sustainability, Industry Moves and Money. It was great getting acquainted with new colleagues—something that I know, with the amount of mergers and acquisitions happening, many advisers have experienced lately. And I loved learning more about their retirement system, something these publications cover in depth.  

For years I’ve been aware of the Australian universal workplace retirement system, called the Superannuation Guarantee, known simply as “Super” to my colleagues down under. In the U.S., it often gets cited as an example when experts discuss our Social Security system and ways to make it more individualized vs. pay-as-you-go.  

In practicality, it shares many similarities with Social Security—in that it has near universal coverage and mandated contributions from both employers and employees—and also with our 401(k), 403(b) and other defined contribution plan systems, as the investment risk is borne by the individual worker. 

Considering that the Australian system has been heralded as superior for years, I was struck at how some measures have taken time to be finalized. A notable one is implementing “the right” contribution amount. This has increased incrementally, from 9% in 2002 up to 12%, taking effect in 2025. 

With all the knowledge of behavioral economics and inertia that has so often led to policy discussions here, I questioned how Australians were expected to select a provider and investments for the mandatory retirement contributions.   

In Australia, an employee has the right to select a Super provider—and this was apparent from all the ads for financial firms I couldn’t escape when turning on the TV in my hotel room. But if the worker doesn’t choose one, the employer has a default provider. Similarly, while workers may direct their own investments, the provider does have default options for any who feel ill-equipped to make those decisions. Perhaps most interesting to me was to dig into some of the more recent initiatives to aid people who had accumulated multiple Super accounts, helping them consolidate the accounts to avoid having fees eat up their savings or, alternatively, to avoid losing track of the accounts. Sound familiar?  

This reinforces some work we’ve seen here in the U.S. about the need to help plan sponsors help workers aggregate their accounts so they can better project their future income picture and see where improvements are called for.  

One interesting framing element was that, when looking for a job in Australia, job-seekers have to ask whether the compensation is being advertised “with Super” or “ex-Super,” meaning if someone is offered $100,000 AUD [Australian dollars], will she expect to have the mandatory contribution removed from that or added on top of that? We don’t always think about match rates in the same way here, because vesting can mean some people don’t get the match dollars as “theirs” for years. But it reinforces to me the value of thinking about benefits as part of total compensation and communicating that whenever possible.  

As we here in the U.S. continue to see initiatives from the government and public policy groups about how to improve our retirement savings system, it’s intriguing to consider how things are done on the other side of the globe.