WEEKLY E-MAIL

30 October 2019

AUSTRALIAN PENSION SYSTEM RANKS THIRD GLOBALLY

By Denise Slattery

The Melbourne Mercer Global Pension Index (MMGPI) has recently rated Australia’s $2.9 trillion superannuation industry as the third-best in the world.

The MMGPI is a collaborative research project between the Monash Centre for Financial Studies – a research centre based within the Monash Business School at Monash University and professional services firm, Mercer. The index compares 37 retirement systems across the globe and covers almost two-thirds of the world’s population. It uses the weighted average of the sub-indices of adequacy, sustainability, and integrity to measure each system against more than 40 indicators.

The chart below outlines some of the topics covered when assessing each countries pension system:

Australia was given a rating of B+, achieving a total index value of 75.3, trailing The Netherlands (81) and Denmark (80.3).

After dropping to fourth place in the index last year, weighed down by the reduction in household savings and tougher age pension assets test, author of the report, David Knox, said that Australia was on the “cusp” of receiving the A-grade rating that both The Netherlands and Denmark received. Raising the Age Pension age as life expectancy increases, adjusting the asset test to improve retirement income for average earners and raising the superannuation guarantee to 12 percent, (as legislated) would improve the system.

Knox believes that the Australian system needs “better integration between the age pension and superannuation, which currently doesn’t provide enough incentive for individuals to contribute. In particular, the overall system needs to provide clear additional benefits from making extra contributions.”

The Australian government last month announced a review of the country’s retirement income, which will examine the so-called three pillars of age pension, superannuation and voluntary savings including homeownership which may address these issues.

Denise Slattery
Senior Para-Planner
Authorised Representative No. 304356

If you have any questions or comments, please email me at denise@gfmwealth.com.au

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