Retirement
Australia slips in global pension index
The Australian superannuation system has been rated at B, falling to fourth place, new research has revealed.
Australia slips in global pension index
The Australian superannuation system has been rated at B, falling to fourth place, new research has revealed.
Australia came in at fourth on the Mercer CFA Institute Global Pension Index this year, overtaken by Israel in the third spot.
The index report noted the decision by some countries, including Australia, to allow temporary access to pension savings in response to the pandemic has materially impacted the adequacy, sustainability and integrity of those pension systems.
Australia had achieved an index value of 74.2 overall, slipping from its score for the year before of 75.3. The nation also ranked 14th for retirement income adequacy.
The top retirement systems in the index, the Netherlands and Denmark, have not permitted early access to pension assets, Deep Kapur, director of the Monash Centre for Financial Studies said. The Netherlands retained its top position, with its value at 86.2, while Thailand had the lowest score (40.8).
Dr David Knox, senior partner at Mercer and lead author of the study, commented: “Each of the three countries ranked above Australia – the Netherlands, Denmark and Israel – has a contribution rate into their funded pension arrangements of 12 per cent or higher, which sets aside more money for the future.
“Unlike the means-tested age pension in Australia, they all have a universal state pension, which means, together with higher contribution rates, their replacement rates, as calculated by the OECD, are higher than Australia’s.”
Meanwhile, CFA Institute vice-chair Maria Wilton said while Australia ranks highly for system integrity and sustainability, it has room to improve for adequacy.
“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 (SG) contributions rate – as is already legislated – rather than hoping for increases in the government-funded age pension,” Ms Wilton said.
The Australian Institution of Superannuation Trustees (AIST) raised the alarm at Australia’s fall, with chief executive Eva Scheerlinck calling on the government to address the gap in retirement savings created by the COVID-19 pandemic and the early release scheme.
“Previous analysis by Mercer and AIST has shown that low-paid, young Australians will bear the brunt of an estimated $100 billion shortfall in retirement savings due to the COVID pandemic,” Ms Scheerlinck said.
“The COVID early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement. Today’s release from Mercer confirms that poverty in retirement is a real possibility for millions of Australians.”
Dr Knox also noted the COVID crisis had led to reduced pension contributions, lower investment returns and higher government debt in most countries.
“Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement,” Dr Knox said.
“It is critical that governments reflect on the strengths and weaknesses of their systems to ensure better long-term outcomes for retirees.”
But even before COVID, many public and private pension systems around the world were under pressure to maintain benefits, Margaret Franklin, president and CEO at the CFA Institute, commented.
The report also found that COVID has increased gender inequality in pension provision.
“That gap is expected to widen further in many pension systems, particularly in the hardest hit sectors where women represent more than half of the workforce, such as hospitality and food services,” Dr Knox said.
Measuring the likelihood that a current system will be able to provide benefits into the future, the average sustainability sub-index score dropped by 1.2 in 2020, due to the negative economic growth across most economies.
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more
Superannuation
Super returns fall into the red for FY22
Unless a recovery takes place in the coming weeks, super funds will experience their fifth negative financial year since the introduction of compulsory super. Read more
Superannuation
Could the Super Home Buyer Scheme ‘torpedo’ Aussie super savings?
Industry Super Australia has argued that the scheme would force funds to hold more cash. Read more
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more
Superannuation
Super returns fall into the red for FY22
Unless a recovery takes place in the coming weeks, super funds will experience their fifth negative financial year since the introduction of compulsory super. Read more
Superannuation
Could the Super Home Buyer Scheme ‘torpedo’ Aussie super savings?
Industry Super Australia has argued that the scheme would force funds to hold more cash. Read more