AustralianSuper CEO Paul Schroder has warned the superannuation system must be “reset” to deal with a looming wave of retirements, as millions of Australians prepare to leave the workforce over the next decade.
“It is more than a wave, it is a tsunami of working Australians about to retire,” Schroder told the National Press Club on Wednesday. “Some planning, some preparing, and so many not sure what to do. This is what I’m thinking about – how can we deliver for them, so they all live well in retirement?”
Schroder said the industry had done well to build a $4 trillion national savings pool – forecast to double to $8 trillion by 2035 – but argued the system remained stuck in the past.
“We’ve become a world-leader in the accumulation of retirement savings,” he said. “We must become a world-leader in the delivery of retirement incomes.”
Among the problems, he pointed to a system that requires members to juggle multiple accounts as they move from work into retirement. As such, his solution is a set of reforms to let members move seamlessly between work and retirement, while secure data-sharing between government and funds would simplify access to the Age Pension.
“I am calling for changes to the law so Australians can easily move back and forth between work and retirement – between saving their money and spending it.
“Currently the system requires members to open a separate retirement account if they want to draw down – and another if they want to keep contributing. For Bachir [a 25-year AustralianSuper member], that means two accounts, two sets of fees, and far too much hassle,” he said.
He also stressed the importance of equity in the system, highlighting that many women, gig workers, migrants and First Nations Australians are still disadvantaged.
“All Australians deserve to live well in retirement, too often that is not true for Aboriginal and Torres Strait Islander people where lower life expectancy, less time in well paid work and the challenges of language and record keeping can all have a material, detrimental impact.”
At the same time, Schroder argued super’s growing scale makes it a critical player in Australia’s economic future.
By 2030, AustralianSuper expects to have more than $250 billion invested domestically – equal to about 9 per cent of GDP.
“Super funds have the opportunity to be a powerhouse of Australia’s renewal – a chance for the sector, business, unions, the community and governments to find the sweet spots between national ambition and investment returns,” he said.
Schroder warned, however, that it would be a disaster for members if governments tried to tell funds what to invest in.
“This isn’t and can’t be about government telling funds what to do,” he said.
“I’ve said this behind closed doors and in front of the cameras and I’ll say it again – it would be a disaster for members if governments tried to tell us what to invest in. Members carry the investment risk, and it is their money.
“The solution requires government and funds to come together in open dialogue about how to better balance risk and make projects investible”.
For its part, AustralianSuper has earmarked about $40 billion for investment in Australia over the next five years, Schroder said.
“If you’re a company with a good idea, if you’re a government with a big plan – our door is open. We’re ready to invest but only when it benefits members – and where risk adjusted returns warrant the investment,” he said.
Schroder added that AustralianSuper is eyeing opportunities in the corporate bond market, innovative businesses and critical infrastructure to support Australia’s future, but cautioned that “not every project will stack up for members” and that funds must be clear-eyed about where interests align – and where they do not.
