The risk of governments failing to financially support their ageing population will become more apparent unless significant pension reform is made now, according to Mercer’s senior partner David Knox.
Furthermore, as world retirement systems come under increasing stress in the current economic climate, they will require ongoing reform to ensure they’re robust enough to support a rapidly ageing population.
Knox’ comments followed the release of Melbourne Mercer’s Global Pension Index, which revealed Australia’s pension system regained its ranking as second in the world.
Australian retirement system has an overall index value of 75, second only to Netherlands (77.9), but better than Switzerland (72.7).
"Australia is very much in reach of becoming the first in the world to receive an A-Grade score if we can address the issue of adequacy by raising the level of compulsory savings via superannuation and continue reforms to reduce costs," Knox said.
He suggested the Australian system could be improved by raising the level of mandatory contributions, introducing a requirement that part of the retirement benefit must be taken as an income stream and reducing the costs of the system.
Director of the Australian Centre for Financial Studies, Deborah Ralston (who worked with Mercer on the Global Pension Index) said ageing population was a top priority for developed countries around the world.
"The ongoing difficulty of developing systems that provide an adequate level of retirement income and yet maintain sustainability, especially in countries with an ageing population, warrants further research and discussion worldwide," Ralston said.
