The ‘Silver Tsunami’ Will Test Australia’s Famed Retirement Program

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All around the world right now, an economic crisis is festering. It's a slow moving disaster that almost nobody seems to have figured out how to address, but also a problem that no country can afford to ignore, and attempts to do anything about it have not gone well. The crisis retirement and the tape you just heard the French retirement related protests have popped up across the world in the last few years, but the ones in France last year

My name is Jule, I'm twenty one years old.

We consider that's the government want to make us work until this is scandalous.

Alarm and I also seventy one ensoridarity with that, young people.

It's a very bad ory firm. It's not the time, it's not a good ida.

My my name is Matthew. I'm forty seven years old. I'm an English teacher, and we're protesting because we don't want to spend the rest of our life just working without retirement.

Despite the massive backlash, Macron and the French government held firm they were facing an economic problem. Countries all across the world are grappling with their populations are getting older and living longer, and it's costing more and more public money to support them all after they stop working. It's related to what some people call the silver tsunami.

Yes, the silver tsunami. It's a global phenomenon. So the number of people that are in the workforce versus the number of people that are now leaving the workforce, this is a really big challenge.

That's Bloomberg's Amy Bainbridge lives works in Australia, the one country that might have actually created a defense against the silver tsunami. They call it the supersystem. That's not a value judgment. It's short for super annuation. And can you just tell us what super annuation means? Why is this system called that?

That's such a good question.

Actually, I've never really gotten to the bottom of exactly why we use this actual name, because really it's it's pensions.

It sounds so grand.

It's a super annuation it's absolutely.

Today on the show Australia's Supersystem, How it works and what the rest of the world can learn from it. I'm Sarah Holder and this is the big Take from Bloomberg News. Amy is based in Melbourne, where she reports on Australia's trillion dollar pension and retirement system. She's also part of it. Do you remember signing up yourself and can you walk us through what that felt like?

So one of my first proper jobs, I was still at university that I worked at a local newspaper as a copy kid, and I was just put automatically into a superannuation fund. And I just remember receiving the paper at the time and just not really understanding what it was all about, but also being a bit irritated to see that this money was going somewhere and that I couldn't access it.

At the time, Amy says she wasn't looking at the big picture, but now she's grateful she didn't have a choice about whether her money was being saved for retirement.

And now I think, oh gosh, I'm so glad we have this compulsory system sometimes because I don't know that I necessarily would have made a great decision you know earlier in my career where money is not.

Money's pretty skinned.

But it wasn't her decision to make. In Australia, if you work even part time, your employer has to set extra money aside into a retirement fund in your name. It's because of a system that was put in. Please not all that long ago.

I'll take you back to like the nineteen eighties.

Back then, Australia's economy was struggling, infleetion was rising and people were watching their retirement savings go up and smoke. Workers were hurting. So some of the country's most powerful unions took on the issue. They struck a deal with their employers. Instead of a salary hike, employers would pay a portion of each worker's wages into a retirement fund.

I've spoken to.

People that were involved at the time, and they went workplace by workplace in their negotiations, and then some superannuation funds were set up as we call them, to cater for those workers.

Amy says. The idea spread sector by sector.

Particularly started in the building and construction industry to get superannuation as part of broader wage negotiation. So then it was transport and health and community services and hospitality sectors. And then there was this huge shift where there was national legislation a few years later that took effect in nineteen ninety two.

The legislation required all employers to contribute to the retirement pension system for all workers. Paul Keating, a former Treasurer, was the Prime Minister back then. He had championed the plan and here he is talking about it in Parliament just after it passed to.

Speaker of this House last night passed the Superinnuation Guarantee levy, and doing so it has entrenched in legislation a great reform which will be of great benefit to coming generations of Australia.

You can hear how proud he is of the policy, even in the face of some jeering from his opposition.

Let's to speak, for the first time in our history, well in advance of reform in other advanced industrial countries, ordinary Australians will be able to build a decent nest egg for their retirement as a result of the policies of the labor movement.

So the system was in place and at first employers were only required to put a little bit aside.

It was the equivalent of three percent of worker wages. But that has steadily grown over the years. Now it's become, you know, a very stable system, and it's growing at a really fast rate.

Today the rate is eleven percent and it'll go up to twelve percent by next July. Keep in mind this is on top of a salary. So come July twenty twenty five, if a worker in Australia is being paid one hundred thousand dollars per year, their employer will have to put an additional twelve thousand dollars into a retirement fund of the worker's choosing. There's a whole menu of investments to choose from. Some funds are high risk, high reward,

They are, yes, they absolutely are.

So.

The biggest fund Australia has is called Australian Super It has three hundred and thirty billion Australian dollars under management, So they are getting big.

If you pull all the funds together. Australia's retirement system is the fourth largest in the world. It's also the fastest growing.

From twenty two to twenty twenty two under the data that we've been given, our system grew by six hundred and thirty one percent. The assets are forecast to top thirteen trillion dollars by twenty forty eight.

So if Australia's supersystem is so flush, why are many aging Australians still worried they won't have enough? That's after the break. We're back. Before the break, we looked at the creation of Australia's pension fund, which some experts see as a possible solution to a looming retirement crisis. Over the next three decades, the global gap between what retirees have set and what they'll need to live is projected to reach four hundred trillion dollars. That's larger than the

Over the past year, I heard more and more conversation about retirement or retirement crisis from many parts of the world, from middle class developing countries to developed countries.

Larry Fink, CEO of the investment giant Blackrock, wrote about this issue in his annual letter, and he came on Bloomberg to talk about it.

We're aging, We're you know, we're all living longer, and I think there's not a dialogue in America or most places about can't we afford that longevity? And our entire retirement system was based on statistics that were created fifty years ago, whereby most Americans retired between sixty and sixty two then, but most Americans then passed away at sixty seven, and today statistically a couple of sixty years old in good health. What I'm going to live over ninety?

Think mentions Australia's model as a possible solution for the issue, and he's not the only one. Amy told us that Paul Schroeder, the CEO of Australia's biggest fund, gets asked for advice all the time.

So he and others I've spoken to regularly getting phone calls from people in the US at varying levels of government or in varying levels of the financial industry and in the UK saying, so, you know, how did you do it? And Paul Schroeder said to me, the best time to do this was thirty years ago.

So it's not great news really, Okay, oh, but we know.

I've spoken to the pensions regulator in the UK and they really see the compulsory nature of our system as being a real look into the future.

Another reason UK regulators might envy Australia's supermodel it takes a lot of pressure off the country's public pension system. By twenty thirty, Australia is projected to spend two point four percent of its GDP on retirement benefits. The US is projected to spend more than twice that and the UK nearly three times as much, and that gap is only projected to widen in future decades. But Australia's system

One of the big bug bears I guess of one of the industry associations is that when superannuation was set up, it was basically designed for a man, usually a person but a man who had an unbroken career, working full time for their entire career, and then you retire and you have a nice savings. But the reality is that, well, that happens for some people. For a lot of people, it doesn't. Some industries, you know, you simply get paid less, and so what happens to those people, they're just naturally

One of the ways the supersystem reinforces pay disparities is along gender lines. The average balance for every age group is lower for women.

Now that's partly because there is a gender pay gap here. And the way that retirement savings are calculated is as a percentage of somebody's income. So of course, if you earn less, you're going to have less retirement savings. But also if you say, take a pause from your career or your work part time, which a lot of women do here in Australia, then that can impact the balance overall.

So how much money are individual Australians getting from the supersystem when they retire.

We've done some calculations here at Bloomberg and People. There's still about two thirds of people or all accounts, people who are like in the sixty to sixty four age bracket that have less than two hundred thousand Australian dollars.

Two hundred thousand Australian dollars is about one hundred and thirty thousand US dollars.

It's actually not a lot when you think that you're still going to have to live for another few decades.

The system is expected to get better for younger generations, who will spend more of their working life with employers putting more money aside.

So I guess the hope will be that in coming years those balances really will start to reap the benefits of having this higher contribution rate of twelve percent, which will be in the middle of next year, and really fueling that savings as well as hopefully decent investment returns for people, depending of course, on which investment option they're in.

Amy told US industry experts are advocating for better financial education that could help people make their money last longer, but it can be hard to give useful standardized guidance. Circumstances and expenses are really different for different people, and cost of living can vary a lot.

So it's really difficult here for people to get the advice they need and to be pointed in the right direction. It's something that the industry says. I mean, I've spoken to so many executives that all say we've been greater

Australia's retirement system not perfect, but better off than most. The main secret to its success so far don't make saving a choice for companies or for workers. Force people to save. It might not be enough, but it is a start. This is the big take from Bluebird News. I'm Sarah Holder. This episode was produced by David Fox, who was edited by Stacy Vennix Smith and Janet Paskin. It was mixed by Alex Subura. It was fact checked by Jessica Beck. Our senior producer is Naomi Shaven. Our