Lessons from Australia
This chapter focuses on some of the lessons that may be learned from the Australian experience. In the Australian industry, crucial decisions on asset allocation and management are taken by those with several degrees of separation from, and no direct relationship with, or responsibility to, fund members. The size and complexity of the industry has often swamped the limited resources of those with responsibility for its regulation. The chapter examines Australia's performance in terms of managing risk, a necessary outcome of the choice of a predominately Defined Contribution system. Delegation of management and outsourcing has been demonstrated to increase cost to an extent that cannot be justified by improvements in performance. Governance arrangements, especially those highlighting the responsibilities of trustees and controlling the cost of outsourced management and advice, were allowed to remain inadequate. The chapter explains that the role played by tax subsidies, and difficulties with how they are targeted.