For all the doom and gloom about the so called “ageing timebomb”, Australia’s superannuation system has been ranked third in the world.
But we can do better.
We scored an underwhelming B+, coming in behind the Netherlands and Denmark which both scored A grades.
These results come from the 2019 Melbourne Mercer Global Pension Index, which ranks the pension (retirement income) systems of different countries.
Author Dr David Knox, Senior Partner at Mercer, has put forward some suggestions to improve our standing.
This would not prevent lump sum benefits but recognise and encourage both income products and the availability of lump sum benefits during retirement. Moves to address this were announced in the 2018 Federal Budget through the retirement income covenant for trustees but there hasn’t been much action on this of late.
Like National Seniors Australia, Dr Knox also recommends a change in the asset test taper rate.
He recommends that the taper rate be reduced from $3 per fortnight to $2.25 per fortnight to increase the part pension and the adequacy of the total income received by retirees.
While the Federal Government recently reduced the deeming rates for the income test, there has been no such change mooted for the asset test taper rate. National Seniors has been critical of the current taper rate because it penalises those who save more.
Raising the Superannuation Guarantee contribution rate from 9.5 per cent to 12 per cent would increase superannuation benefits and improve the long-term sustainability of the system.
Contribution rates in the Netherlands and Denmark are 15 per cent and 12 per cent, respectively. Both countries also have a universal pension. No wonder they are ahead of Australia.
National Seniors has called on politicians to cut their own superannuation rate as part of our Federal Budget Submission.
It is hypocritical of politicians receiving 15.4 per cent to freeze the Superannuation Guarantee at 9.5 per cent.
- Raising the level of assets set aside for superannuation benefits from 137% to 150% of GDP.
- Lifting labour force participation for people aged 55-64 from 66.7% to 75%.
- Increasing the household saving rate and reducing household debt to improve the net assets for Australians in retirement. Currently, Australia has the second highest level of net household debt, expressed as a proportion of GDP after Switzerland.
- Better integration between the Age Pension and superannuation. It’s also important the overall system provides adequate benefits in a sustainable manner over the decades to come.
All Australians deserve a retirement income system that is fair, sustainable, adequate and certain.
You can make a difference.
Join us as we fight for a fairer retirement system.