ABSTRACT
The public finance literature often describes pension systems as consisting of two 'tiers' or 'pillars'. Experience in several Latin American countries, and elsewhere, has shown the dangers of introducing inadequately regulated market-oriented pension systems with compulsory contributions. Australia has followed the UK in developing many aspects of its regulatory system and hence has also sought to rely heavily on competition and choice to curtail rent-seeking. The encouragement of private sector management of contributed funds in Australia, rather than developing a state-controlled and managed system, resulted from both historical and ideological pressures. A variety of inquiries into the Australian system have highlighted inadequate governance and disclosure arrangements. Governments have introduced numerous reforms, mainly to reduce the burden on the exchequer but also to provide more flexibility for retirees by permitting easier access to pension assets on retirement.
