Australia’s ‘Choice of Fund’ Legislation: Success or Failure?

Abstract

Four years after the introduction of Australia’s Choice of Fund policy, this article assesses whether it is achieving its intended goals. The policy was based on the premise that by offering workers a wide choice of pension fund organizations to manage their retirement savings, competition between these funds would intensify, thereby lowering costs and improving the net performance of plan members. Our assessment leads to the conclusion that the Choice of Fund policy is not achieving its intended goals because many Australian workers are highly apathetic about their pension savings. Efforts would be better spent designing pension systems with a series of well thought-out defaults for the vast majority of workers who “choose not to choose”.

Keywords: Choice, Competition, Liberalization, Pension Fund, Superannuation