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Originally Posted by Ella
What a bizzare system! As an Australian, I pay a compulsary figure of between 2% and 10% of my fortnightly gross wage to superannuation, a scheme that holds our funds until our retirement and pays us around 8% annual interest. My employer also contributes a compulsary fortnightly figure that roughly matches my contribution. I receive annual statements showing my contributions and the interest I have earned for that financial year.
Our superannuation is designed for us not be reliant on the government in our retirement, and be forced to claim the age pension. The age pension is available to Australians of a specific age, roughly 65, and is income and assets tested. But, as tax payers, we do not directly contribute to this pension, at least not directly, as US citizens do. It is simply another benefit available to be claimed as part of our Social Security system.
I've worked for our Social Security body for around 7 years, and have done a bit of research into how the system works overseas, and am astounded at how some schemes are run. A friend of mine from the US described this system of taxing for your own retirement, and I could not believe how you are forced to pay into a fund and have no idea of where this money is, or how much you have contributed. There seems to be no accountability at all. No wonder it pisses people off!
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How do you mean that your contributions are not directly taxed like ours are? Your scheme sounds more similar than dissimilar from what you described. Our social security is funded through payroll contributions, not federal taxes.
You may have been given an unfair portrayal of our system. This is possibly due to the uncertainty of the fund's solvency and our cultural reticence of government forced savings and redistribution. Nonetheless, we receive a yearly statement that documents our current and YTD contribution. It also projects our payout according to the year we might choose to retire (65 years versus 70 years old, for example).
Out of curiousity, does 8% APR keep up with inflation in Australia? It doesn't seem like your savings would even be beneficial in the long-run without funding from other external sources.