Australia is home to the second best retirement savings system in the world.
The increase to employees’ compulsory superannuation payments and pension rises have helped the nation leap ahead of the Netherlands and take out second position in the Melbourne Mercer Global Pension Index. The index gave Australia a score of 79.9 out of 100 this year, rising from 77.8 per cent in 2013.
Denmark is now the only country to be given a better retirement scorecard at 82.4 points while the Netherlands ranked third at 79.2. The index did a global comparison of pension systems, examining 25 countries and covered more than half of the world’s population using more than 50 indicators.
Australians could be left in the dark about their super payments The report’s author and Mercer senior partner Dr David Knox said Australia now had a solid retirement system in place that would help support people in retirement despite many still requiring a part pension.
“The government announced compulsory increases to superannuation from 9 per cent to 12 per cent, we are now at 9.5 per cent which the government has frozen for a few years,’’ he said. “The primary reason for the high score this year is the increase to levels of contributions to superannuation which means the level of retirement income will be higher. “It’s also been supported by an increase to the level of the aged pension, so when you increase the two the level of your retirement income will increase.’’
Compulsory super payments will now be frozen at 9.5 per cent for seven years and not increase again until July 2021 when it rises again to 10 per cent. From there it will rise by 0.5 each year until it reaches 12 per cent in 2025.
The Federal Government announced last month Australia’s 3.7 million pensioners would receive their second increase for 2014 — each fortnight single age pensioners would pocket an extra $11.50 and couple $17.40. But the index highlighted there was still room for Australia’s retirement system to improve including measures to increase the labour force participation rate at older ages and lifting the pension age as life expectancy continues to increase.
Australian Super’s chief executive Ian Silk said the report showed the nation’s compulsory super system was “not fully developed” and nobody has in the system “long enough to receive its full benefits.”