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Australian pension system second in the world
Australia's retirement savings system has been ranked second best in the world just behind Denmark, but the ‘A' grade remains elusive, according to the 2014 Melbourne Mercer Global Pension Index (MMGPI).
Australia jumped from third to second ranking this year, mainly due to increasing the superannuation guarantee payment from 9 per cent to 9.5 per cent over the last 16 months, the first hikes in 11 years, along with the planned increase to 12 per cent.
Australia scored 79.9 in 2014, up from 77.8 in 2013. It achieved the highest score (81.2) in the adequacy sub-index.
Report author and Mercer senior partner David Knox also looked at trust and transparency, and said communication to members is more vital than ever, and it is under the radar from members, employers, regulators, consumer groups, politicians and the media.
"Governments, regulators and financial industries have to ensure good governance frameworks and practices that promote regular easy to understand communication, clear benefit projections, and access to comparative information in a cost-efficient manner."
Professor Deborah Ralston from the Australian Centre for Financial Studies (ACFS) said the study, which covered 25 countries and close to 60 per cent of the world's population, showed many countries have the common challenge of the social and economic effects of ageing populations.
She said global comparisons can lead to global lessons for government, industry and academia as they figure out how to sustain income for an ageing population.
Mercer said there is room for improvement in the Australian system, including increasing the labour force participation rate at older ages, increasing the pension age as people live longer, and increasing the minimum age at which people get benefits from private pension plans so that they can only access retirement benefits five years before age pension eligibility.
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