In 1992, Australia was the first country with developed capital markets to commit its retirement system to a funded market-based defined contribution (DC) system.
It wasn't the first to use DC. Chile changed its equivalent of the American Social Security system to funded DC in 1981. But it didn't have developed capital markets. In fact, the change to DC was part of a linked set of other changes, one being to create investment opportunities by privatizing majority chunks of government-owned enterprises, and another being to register a number of investment managers who could then compete for the privilege of being chosen by the individuals to manage their retirement investments. The resulting launch was quite different from Australia's and from the American DC system.
Nor was Chile the first to use DC for all its workers. The Singapore Central Provident Fund, for example, was established in 1955. But it wasn't then a market-based system. The government used the contributions as it thought fit, and declared a rate of interest each year to add to each participant's account balance.
That's one reason we use Australia as a case study—we can look at it from its origins without having to say, "Yes, but this aspect was totally different from the United States." Of course, there are many aspects that are still maturing. Not until an entire generation passes through the system, from starting work through retirement to death, can the system be said to be fully ...