Fink says US policymakers can learn from ‘model’ Aussie super system

In his customary letter to investors, BlackRock chair and chief executive Larry Fink said Australia’s experience with superannuation could be a good model for American policymakers to study and build on.

Emphasising the importance of rethinking retirement as the world ages at a faster pace than it previously did – by the mid-century mark, one-in-six people globally will be over the age of 65, up from one in 11 in 2019 – Fink said countries will need to modernise their retirement systems and expand their capital markets to provide for longer life expectancy.

According to Fink, national initiatives to modernise retirement should begin by looking at the challenges through three different lenses – from the perspective of a current worker, someone who has already retired, and from the perspective of the population as a whole.

“We should want more people to live more years. But we can’t overlook the massive impact on the country’s retirement system,” Fink said.

Citing the impact longer life expectancy is having on the US Social Security system, Fink noted that while no one should have to work longer, he believes “it’s a bit crazy that our anchor idea for the right retirement age originates from the time of the Ottoman Empire”.

Moreover, he drew on the 2022 US Census Bureau’s regular survey of consumer finances that revealed that nearly half of Americans aged 55–65 don’t have a single dollar saved in personal retirement accounts.

“Why? Well, the first barrier to retirement investing is affordability,” he said, adding that saving for retirement is far from a “simple task”.

Delving further into the inadequacies of the US retirement system, Fink praised Australia’s $3.7 trillion super system, particularly its support of part-time and contract workers.

Acknowledging that there are 57 million people in America who don’t have access to a defined contribution plan, Fink said other nations, including Australia, make things simpler for their part-time and contract workers.

“In Australia, employers must contribute a portion of income for every worker between the ages of 18 and 70 into a retirement account, which then belongs to the employee,” Fink wrote.

“The Superannuation Guarantee was introduced in 1992 when the country seemed like it was on the path to a retirement crisis. Thirty-two years later, Australians likely have more retirement savings per capita than any other country. The nation has the world’s 54th largest population, but the fourth largest retirement system.”

Noting that “every country is different, so every retirement system should be different”, Fink said Australia’s experience with super could be a “good model for American policymakers to study and build on”.

Some already are, he said.

“There are about 20 US states – like Colorado and Virginia – that have instituted retirement systems to cover all workers like Australia does, even if they’re gig or part-time,” Fink said.

“It’s a good thing that legislators are proposing different bills and states are becoming ‘laboratories of retirement’. More should consider it.

“The benefits could be enormous for individual retirees. These new programs could also help the US ensure the long-term solvency of Social Security. That’s what Australia found – their Superannuation Guarantee relieved the financial tension in their country’s public pension program.”

Ultimately, Fink declared that as a nation, the US “should do everything we can to make retirement investing more automatic for workers”.

Fink also touched on the lack of preparedness among retirees to spend their retirement savings – an issue Australia, too, faces.

Namely, the local government is now encouraging superannuation funds to prioritise how members live post-retirement after focusing on the accumulation phase for 30 years.