Super system maintains high world ranking
Australia’s superannuation system has been rated the third best pension system in the world, scoring particularly strongly when it comes to governance and consumer trust in the system, according to Mercer.
The super consultancy’s annual Global Pension Index, released this week, looked at three key pillars including the adequacy, sustainability and integrity of pension systems in 37 different markets and saw Australia ranked third behind the Netherlands and Denmark, with an overall 'grade' of B+.
Australia’s system ranked the highest — at 85.7 out of 100 — in the integrity pillar, which looked at community confidence in private pension providers, the role of regulation and governance in the pension system, investor protection against risks and communication to pension fund members.
Australian super received its lowest score of 70.3 in the adequacy pillar, which examined factors such as the access age to receive pension benefits, the form in which retirement benefits were taken and the degree to which benefits continued to accrue when individuals took time out of the workforce.
In order to improve the ranking of the Australian system, the report recommended introducing the requirement for part of a member’s retirement benefit to be taken as an income stream, increasing labour force participation for older Australians and introducing a mechanism to increase the pension age as life expectancy continued to increase.
In addition, the high level of household debt among Australian pension fund members was a particular concern, with Australia recording the second highest level of household debt as a percentage of GDP out of all 37 markets.
