The administration of US President Donald Trump intends to develop an Australian-style pension savings program for American workers. According to the president, the authorities are already “seriously studying” this model, after which the corresponding proposal will be discussed in Congress. In the international ranking of pension systems Mercer CFA Institute Global Pension Index for 2025 USA received C+, while Australia received a higher grade of B+.
As Trump said in July, Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and other administration officials are already working on the initiative. He did not specify the timing of introducing the corresponding bill to Congress.
“I mentioned today that Australia has a very good system – it has really shown excellent results. We are studying it very seriously. We'll take this model and maybe tweak it a little and make it even better. But we will definitely do it,” Trump said.
What's wrong with the American pension?
The federal pension system in the United States relies on the Social Security Administration's Social Security fund, which may be on the verge of bankruptcy as early as 2032, writes USA Today. More money is now leaving Social Security than coming in, and the once-sizable reserve is rapidly shrinking. When it runs out, the available revenue will only be enough to pay about 83% of the intended pension amount.
The combined tax rate from which the fund is formed is 12.4% – the employee and employer usually contribute 6.2% of wages. These funds are directed to the payment of benefits to current pensioners, and not to the individual savings accounts of employees.
The employer decides voluntarily whether to offer employees an individual savings program and make contributions to it. The most common option is a 401(k) plan. According to statistics, only about half of private sector employees in the United States participate in corporate pension plans.
Employers pay for Australians
The basis of the Australian pension system is the mandatory superannuation program. Under this scheme, employers transfer an amount equal to 12% of their earnings to an employee’s pension account.
The funds are typically then invested by private pension funds, but are owned by the employee himself. In their design, such accounts are somewhat reminiscent of American 401(k) plans, and contributions to them are made from the employee’s adulthood until the age of 70, if he does not retire earlier.
Employees can also fund their own retirement accounts by contributing a portion of their pre-tax salary. This practice is called salary sacrifice. The current contribution limit is A$30,000 per year. However, early withdrawal of pension savings is subject to strict restrictions.
For pensioners who lack savings and their own income, the state pays state benefits. They are available to people over the age of 67 whose income and value of property owned do not exceed the established threshold.
Such a government pension averages A$1,200 twice a month (about US$840), and the average final superannuation account balance ranges from A$260,000 to A$300,000 (US$210,000), depending on retirement age.
Superannuation can be accessed from age 60, but the maximum benefit will be gained by retiring at 67 or later.
The average Social Security payment in the United States is just over $2,000 per month. You can expect to receive the maximum pension when you retire from work at age 67. The average 401(k) balance at retirement after age 65 can be as high as $300,000, but the median, which takes into account the difference between the richest and poorest Americans, is less than $100,000, CNBC noted in February of this year.
Don't break what works?
Forbes believes that the American system still has one important advantage over the Australian one – Social Security payments are constant for all retirees, which in finance is called an annuity. In Australia, set aside money often runs out before a person’s death, the publication notes, and therefore calls on the Trump administration not to completely abandon federal payments in favor of individual accounts.
Previously, the Trump administration had already taken the first steps to reform the pension system. In April, the president signed an executive order aimed at expanding access to retirement savings programs for workers whose employers do not provide them with the opportunity to save additional funds. By January 1, 2027, the TrumpIRA.gov website will be launched, through which employees will be able to connect to private pension plans.
By this time, the Saver's Match program, an initiative adopted in 2022 under the Joe Biden administration, should be operational. It provides for state co-financing of employee pension savings in the amount of up to $1,000 per year. The amount of payments will depend on the amount of personal contributions and income level.
