Australian retirement income system ranked world’s third best
Do you think you’ll have enough money to live well in retirement? Australia’s system may perform well against the rest of the world, but the key recommendations to maintaining a top spot won’t be popular with everybody.
VIC News
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Australia’s retirement system has been rated the world’s third best in a new report.
But people should be encouraged to work longer to boost their nest eggs, experts suggest.
Automatically lifting the pension age as life expectancy rises is another recommended improvement to ease pressure on the public purse.
A more generous assets test to allow higher part age pension payments is also proposed.
The Melbourne Mercer Global Pension Index calls for households to save more and reduce debt so that they have more money in retirement.
The report’s lead author, Dr David Knox, said an increasing number of people were entering retirement with mortgages, credit card, car loan and other debts.
“As people retire they have to pay off that debt, so some of their superannuation won’t be for putting food on the table or going on a holiday but to pay off home loans,” Dr Knox said.
“That impacts on the living standards that people have when they leave the workforce.”
The international study analysed retirement income systems including superannuation and pensions. It also considered the impact of home ownership, household savings rates and household debt levels.
Australia was only outperformed by the Netherlands and Denmark.
The research compared 37 systems covering almost two-thirds of the global population to measure their adequacy, sustainability and integrity.
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The study found people were more willing to spend or borrow money before retirement if their superannuation balances grew. This was likely because they felt wealthier.
It noted ageing populations were putting pressure on pension systems around the world, and that extraordinarily low interest rates in many countries were reducing retirees’ financial returns.
Dr Knox said Australian retirees earning little on their savings should be compensated with a higher part age pension through a reduction in the impact of the assets test.
“The assets test is too tough in the current economic environment,” he said.
And retirees with a reasonable superannuation balance should be forced to take part of their nest egg as a steady income rather than being allowed to grab an entire lump sum.
A federal government review of the nation’s retirement system, announced last month, will examine compulsory superannuation, the age pension, and voluntary savings.