Superannuation has been defined as moneys invested in the productive working life of an individual to return an income stream or a lump sum upon retirement. The superannuation scheme in Australia was initially availed to employees of selected companies since the federation of Australia and was further extended to all public servants. Historically, in the 1970s, the superannuation in Australia was sponsored by the employer and was only available for the executive employees excluding all women. The Australian superannuation system provides equity and economic benefits of the Australian citizens and the entire nation. The scheme has enabled the Australian financial system to perform well in bridging the financial needs of the Australian people.
The scheme has facilitated economic and productivity growth in the country. However, scholars have voiced concerns over the economic benefits and challenges the Australian economy may face in the future which may provide financial implications in the country such as fiscal pressures, financial crisis, changes in technology, productivity growth and international integration. Superannuation describes and analyses the context of assets, financial products and debts that provides real Australian financial position (Mitchell 1999, p. 19). This essay provides evidence-based analysis of the Australian superannuation system and seeks to further suggestions that have been incorporated provide effectiveness and efficiency of the scheme.
The Australian superannuation system has led to the production of the fourth largest fund pools in the global management. The funds have raised assets worth $ 1.6 tn under management. Besides the industry has grown larger than the ASX capitalization and combined all Australian banks deposits. It is estimated that the total savings of the Australian superannuation exceeds the gross domestic product of the country (Australia 2010, p. 12). The size of the superannuation funds has augured adequately for the system retirement future of Australia. However, the large pool of funds has attracted interest from various opinionate regarding the effect on the community members and the nation’s economy.
The large pool of funds in the Australian superannuation system has enabled supper assets allocation that has potentially derived, developed and reshaped the economy through contributing to the corporate development bond market, supporting innovation, funding infrastructure, employment opportunities and creation of economic and equity growth among the members. The large pool of funds in the system and the diversification of investments mean that with the proportional increase in these funds, there will be increased global investment rather than local investment.
The key attributes of the Australian superannuation mentions fees charged to a member of the MySuper product. According to the Australian government, the fees charged are limited, and most of the members are restricted from recovering the service providing costs. The main fee that applies incorporates the investment fee, administration fee and other fees such as exit and investment switching fee. Furthermore, the system offers an investment option for using the current balanced fund offering. The level of disclosure to trustee funds and performance in investment in relation to fees are higher than the initial fee requirements. The funds can be used for lifecycle investment that in turn improves the lives of the members and the overall economy of Australia.
The investment management and asset allocation style provide by the superannuation policy can provide higher net returns. However, the increase benefits results from cost to the superannuation system of Australia that is below the overseas jurisdictions (Australia & Cooper 2010, p. 86). The research commissioned on the Australian superannuation system to examine the Financial System Inquiry (FSI) preliminary report in comparison between the super system in Australia and Chile. According to investigative research findings, the fees of My Super favorably compare with those of the private pension fund administrator system in Chile. The superannuation policy provides options of allowing the MySuper asset products to compete for default superannuation. This provides room for the superannuation funds, management investments and life insurers’ schemes to rationalize the legacy products. Scholars predict the asset feature of the superannuation system to grow in the future. According to the report, the asset-based fees will provide economic growth as the size increases (Mitchell 1999, p. 251). The pool of assets will require constant vigilance to maintain the appropriate total dollar fees, rather than just shifting focus on the percentages and not trending downwards.
The experience of the members of the Australian superannuation system may vary under the strategy of the lifestyle. Investments in the system provide balanced growth of funds in the accumulation phase. The incomes from the retirement are also a key are of the system an, however, some critiques objects that the retirement incomes are underdeveloped and may not manage the risks associated with retirees. This provides a complex discussion of taxation and payment transfer and retirement incomes. Furthermore, the superannuation system of Australia provides equity supper for the members that lead to investment diversification, moderate income, low cost and growth of capital. The system highlights are investing with significant managers of investment and multi-asset classes that in turn provide long-term financial returns that are in harmony with the retirement saving for the members. Furthermore, the Australian superannuation system provides total and permanent disablement insurance and death insurance benefits with reliable and recognizable insurers in Australia (Jefferson & Preston 2005, p. 127). Also, the system has MyEquity Super Dashboard that assist the members understand the performances, fees and risks associated.
Demographically, MySuper provides that the superannuation system of Australia builds in a product that acknowledges the direct superannuation making-making engagement for all members. The Australian superannuation system is not dependent on disengagement; bur rather works for who participate actively in the product. According to the recent investigation of the account balances, it shows that the superannuation funds are less than $ 25, 0003. According to the figures, the core demographic member of the superannuation system of Australia is able to cater efficiently. As the account balances grow, the superannuation system of Australia will ensure the money value, effective and simple for the members. Offering superannuation product to the members provides a strategic feature of choice in the Australian system (Australia, & Cooper 2010, 127). Therefore, this provides the members the power to tailor their strategies for superannuation for their financial safeguards and needs. Ideally, this will provide lower costs and make the funds benefit the Australian economy.
Suggestions to Australian Superannuation System
The investment asset funds are one of the significant roles played by the superannuation funds. The function of governing investments is instrumental in ensuring that the procedures incorporated in the process of investments are risk managed and efficient at all levels. The panel recognizes that the modern superannuation investment is a complex activity that needs multiple technical skills and expertise. Therefore, the superannuation funds incorporate the asset consultants, fund managers and custodians to provide assistance. Therefore, pressure is mounted on the trustee to provide an appointment process and monitoring process of the agents, thus promoting the members’ interests. The areas identified by the panel that requires significant input for economic and equity achievement is the system of regulation (Jefferson & Preston 2005, p. 199). The members accumulate them retirement benefits and savings leading to better investment decisions.
According to Australia (2010, p. 17) comparability and transparency are another critical feature of the superannuation system that enables operation and efficiency of the savings based on markets. The panel believed that the superannuation of Australia would provide market transparency and comparability leading to accountability and reliability superannuation system of Australian that can be improved effectively through appropriate regulations. To make quick progress towards comparability accuracy, the system should develop a new power to make reporting of the system outcome standardized. The great benefit of the funds of system transparency should also be introduced in the Australian superannuation system. This should include academics, regulators, advisors and analysts. The quality of the information availed is little to experts requiring the use of the information for equity and benefit of members and the nation at large. Besides, there is a need to introduce cost effective and dramatic change in the Australian superannuation. Finally, the members needs to access minimum information when considering the investments options of superannuation
Insurance in Superannuation
Incorporating insurance in the superannuation system of Australia can be an excellent step to benefit the members and enlarge investment options. When the members cannot work a result of permanent disablement or death, insurance play an integral function in ensuring they are adequately compensated. The Australian superannuation should integrate insurance that is a complex product for members of the system. The trustees should consider the strategy of insurance and provide elaborate regulations on its implementation (Australia, & Cooper 2010, 132). Therefore, insurance information must be availed, and the trustees provide clear guidelines for the members to compare the options of insurance, recognizing the associates’ financial concerns.
Such instances may meet the members’’ needs so that sufficient benefit is provided in event there is need to access the retirement benefits earlier than expected in Australian superannuation, the insurance should be automatically provided to the members so that they continue to benefit from the coverage without incorporating remuneration of advisors who get commissioned.
While many panel bodies have suggested reforms for the Australian superannuation, the main idea is to better understand and protect the net egg of the Australian workers. The biggest aim of establishing MySuper system was to maintain market competition and lower the overall costs. The super is considered a better money value by increasing comparability and transparency in the system. However, there exist some critiques and misconceptions over the system. The Australian superannuation system provides a higher level of engagement without compromising the human nature. It is obvious that the Australian superannuation system has been reviewed to benefit the members and reinforce economic growth. Besides, the funds require the trustees to make elaborate decisions that benefit the overall equity and economy of the members and the nation.
Notably, recent research on the features of the Australian superannuation provides more informed basis of refining the future of the system and discloses the risks associated with superannuation funds. Thus, it is comparative for the Australian government and all stakeholders including the wiser community, accounting standard researchers and industry regulators to be incorporated in the redefining the strategies and features of the Australian superannuation system.
Australia, & Cooper, J. (2010). Review into the Governance, Efficiency, Structure and Operation of Australia’s Superannuation System final report. Canberra, The Review.
Australia. (2010). Super system review final report. [Canberra, A.C.T.?], Commonwealth of Australia.
Cooper, J. (2010). Super for Members: A New Paradigm for Australia’s Retirement Income System. Rotman International Journal of Pension Management. 3, 8-15.
Jefferson, T., & Preston, A. (2005). Australia’s & ldquo; Other Close Curly Double Quote Gender Wage Gap: Baby Boomers and Compulsory Superannuation Accounts. Feminist Economics. 11, 79-101.
Mitchell, D. (1999). Australia’s superannuation system: model for US Social Security reform. Thesis (Ph. D.)–George Mason University, 199
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