Australian super system holds own among global peers
Australia has continued to rank third in the world for the overall quality, adequacy and sustainability of its superannuation system, with the Stronger Super reforms improving its performance in the 2013 Melbourne Mercer Global Pension Index.
Australia ranked third for the second year in a row, behind Denmark and The Netherlands. The introduction of the stronger regulatory requirements around superannuation lifted the nation’s overall score from 75.7 in 2012 to 77.8 in 2013. In comparison the United Kingdom ranked ninth and the United States ranked eleventh.
The Index report noted that the net replacement rate in Australia, which measures an individual’s pre-retirement income paid in retirement, had also improved. It complemented the improved integrity in the superannuation system around funding requirements and conflicts of interest within the governance of superannuation funds.
The report stated that the Australian system could be improved, with a requirement that part of the retirement benefit be taken as an income stream and lifting the pension age in line with life expectancy increases.
It also suggested increasing the number of older workers in the labour force while lifting the minimum age to receive benefits from private superannuation savings, so that retirement benefits are not available more than five years before the age pension eligibility.
Mercer senior partner Dr David Knox said the index research also highlighted the increasing move to defined contribution (DC) pension systems around the world, an area in which Australia has lead the way.
“A DC system is well established in many countries and it is clearly heading this way in many others. Australia has arguably been a trail blazer in terms of adopting a DC system. However, the conversion of DC benefits into adequate and sustainable retirement incomes remains a largely unresolved problem in many countries, including Australia,” Knox said.
“As countries grapple with rising life expectancies, increased government debt, uncertain economic conditions and a global shift to DC plans, there are still many lessons to be learnt and new solutions to be found, particularly for the post-retirement years.
“Developing effective and sustainable post-retirement solutions has to be one of the most critical challenges for policy makers and retirement industries around the globe.”
The Melbourne Mercer Global Pension Index is now in its fifth year and measures the adequacy, sustainability and integrity of a country’s pension system by examining the publicly and privately funded components of a pension system and as well as personal assets and savings outside the pension system.
“Developing effective and sustainable post-retirement solutions has to be one of the most critical challenges for policy makers and retirement industries around the globe.”
The Melbourne Mercer Global Pension Index is now in its fifth year and measures the adequacy, sustainability and integrity of a country’s pension system by examining the public and private funded components of a pension system and as well as personal assets and savings outside the pension system.
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