Trump embraces Australian pension system backed by Larry Fink

(Bloomberg) — The world’s most envied retirement plan has another high-profile backer: President Donald Trump.

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Buoyed by public enthusiasm for Trump accounts aimed at children, Trump last week renewed his focus on their parents and grandparents. He added that he was taking inspiration from Australia’s private pension funds, known as superannuation funds, to reform the ailing US retirement system.

The president has repeatedly praised the country’s private, employer-funded system in recent months. But last week he said he had ordered Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to study the model as part of their discussions with Congress on how to expand the U.S. retirement system.

“They have a plan in Australia, which people really like. It has worked really, really well,” Trump said July 6, during his meeting with BlackRock Inc. CEO Larry Fink, a staunch supporter of the Australian model for several years. “We’re going to talk to Congress about it and see if we can implement it.”

Asset managers and retirement policy experts often look with envy at Australia’s rapidly growing superannuation system, estimated at $3.1 trillion. In the early 1990s, this country passed legislation requiring employers to supplement workers’ salaries with contributions to private pensions.

The contribution rate has gradually increased to 12% of employee salaries, including for part-time workers. In total, the system is on track to become the second largest pension scheme in the world over the next decade.

Meanwhile, the United States faces its own pension crisis. The Social Security trust fund is expected to be depleted in 2032, requiring significant reductions in promised benefits. Outside of government benefits, most workers are woefully undersaved: Among the 5 million people in 401(k)-style plans administered by Vanguard, the median balance was just $44,115 last year. This doesn’t even take into account the approximately 40% of private sector workers who do not have access to this type of plan.

Fink wrote at length about the problems in the United States in a 2024 investor letter, highlighting Australia’s success at the same time. He has often praised the plan and urged U.S. lawmakers to do more.

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In this context, it is easy to see the political appeal of a model that imposes high contributions, extends coverage even to part-time workers, and shifts responsibility for financing and managing the schemes to the private sector.

Texas Sen. Ted Cruz, who has been a vocal critic of the U.S. Social Security system, applauded Trump’s comments in a July 8 article on X, calling them “absolutely spot on.”

“I’m writing legislation to ensure that every American – from bartenders to gig workers – has the opportunity to create wealth, own a piece of the American dream, and share in our nation’s prosperity,” Cruz said.

Retirement experts warn that Australia’s system is not an easy solution for the United States. Even if the government wants to replace Social Security, it still needs to figure out how to manage the already promised benefits — which it currently funds primarily through payroll taxes.

Some officials have floated the idea of ​​creating a “sovereign wealth fund” that could be deployed to finance any Social Security shortfall, but that is not without “significant implications for the economy,” said Gopi Shah Goda, director of the Retirement Security Project at the Brookings Institution.

And any compulsory employer contribution risks arousing great indignation from businesses. In Australia, companies have argued they are diverting funds that would otherwise be spent on pay rises. (Researchers and economists are divided.)

“My view is that our system is better designed,” said Alicia Munnell, a senior advisor at the Center for Retirement Research at Boston College. She highlighted the combination of 401(k)-style private investment plans and the guarantee provided by inflation-adjusted Social Security payments, and noted that, just like in the United States, Australians struggle to turn their investments into income streams that last as long as they do.

“We know what to do,” she said. “Fix Social Security and increase the percentage of workers enrolled in workplace pension plans.”

Even if Trump likes the Australian model, it is premature to say that what is ultimately developed will reflect this specific approach, a White House official said. Trump acquiesced to that in his most recent comments, saying his administration would “accept that, and maybe we’ll make it a little more specific, a little better.”

–With assistance from Caitlin Reilly, Suzanne Woolley, Silla Brush, Jennifer A. Dlouhy and Chris Bourke.

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