A recent government review has found “the Australian retirement income system is effective, sound and its costs are broadly sustainable”.
Australia’s retirement system has also once again ranked highly in the annual global index, finishing 2020 as the world’s fourth best.
The annual Mercer CFA Institute Global Pension Index ranks countries based on more than 50 indicators, with retirement saving schemes and pension arrangements significant contributors.
Australia’s score of 74.2 placed it only behind Israel (74.7), Denmark (81.4) and the Netherlands (82.6).
While the result reinforces the robustness of the Australian system, we are one of the few countries whose ranking has slipped in recent years.
Australia’s score peaked in 2014 at 79.9 and slipped from third ranking in 2019 to fourth this year.
Crucially, the three countries ranked above Australia have super contribution rates of 12% or above, as highlighted by Investment Magazine.
CFA Institute Vice Chair Maria Wilton said the index results provided an opportunity for governments to improve their retirement systems.
“From an Australian perspective, we rank highly in terms of integrity and sustainability. By the numbers, pension fund members can trust the system given the strong governance and regulatory frameworks in place,” she said.
“The clear opportunity for improvement is with respect to adequacy,” Ms Wilton said.
“Does the whole retirement system deliver enough to retirees?
“With COVID-19 impacting the government fiscal position for many years to come, it is logical to consider addressing this through private provision and increasing the Superannuation Guarantee Charge (SGC) contributions rate – as is already legislated – rather than hoping for increases in the government funded Age Pension.”
Public debate about legislated increases to superannuation has increased in recent months, with the Morrison government indicating it may freeze or abandon next year’s legislated increase to 10%.
Future legislated increases that would see base super contributions reach 12% in 2025 are also at risk.
A recent survey indicated 75% of Australians support increasing the super guarantee to 12%.
Only 12% of respondents said super should remain unchanged at the current rate of 9.5%.
To find out more about why the legislated increase to 12% super must be implemented, read our union’s article We’ve waited 30 years for 12% super – it’s time to raise the rate.
Mercer CFA said this year’s report also reflected the impacts of COVID-19 with reductions in retirement saving contributions, lower investment returns and higher government debt in most countries.
“It is critical that governments reflect on the strengths and weaknesses of their systems to ensure better long-term outcomes for retirees,” a Mercer CFA partner said.
To sign the Australian Unions petition in support of 12% super, click here.