Aussie super regains No2 slot

AUSTRALIA'S $1.3 trillion superannuation system has regained its second-ranked spot in a global measure of retirement savings schemes, finishing behind the Netherlands when it comes to payments to retirees.

By InvestSMART · 12 Oct 2011

By InvestSMART ·
12 Oct 2011

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However, Australia could emerge on top if the government goes ahead with plans to lift the compulsory super savings rate to 12 per cent from 9 per cent, reports the latest Global Pension Index.

"Australia is quite a robust system, we're relatively well funded, we're still putting additional money aside and we don't have the demographic pressures which are extreme in other countries," said David Knox, senior partner with Mercer, a superannuation advisory firm. "But if we move in the direction of increasing the superannuation guarantee, increasing the workforce participation rate among older Australians . . . then we can actually become the first gold-standard [superannuation] system," he said.

The index tracks public and private superannuation systems across 16 countries from Europe, Latin America and parts of Asia. The rankings are compiled through a combined measure of payout on retirement, whether a country can afford a scheme over time, and the level of trust in the superannuation system.

Australia regained its second spot in the rankings with an overall score of 75, up from fourth place last year. It was behind the Netherlands on 77.9. China was last, at 42.5.

Still, the study found Australia had the largest exposure to sharemarkets among global schemes, which can leave retirees' savings vulnerable to wild swings.

It comes in the midst of a shake-up of Australia's super sector, including tougher oversight of funds.

The move is aimed at improving confidence in the superannuation industry, as volatile global markets have produced shrinking returns, and follows recommendations from the federal government's "stronger super" reforms.

All the super ranking - Money liftout

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Frequently Asked Questions about this Article…

What did the Global Pension Index find about Australia’s superannuation ranking?

The Global Pension Index reported that Australia regained the No. 2 spot among 16 countries, scoring 75 overall. The Netherlands topped the list with a score of 77.9, while China ranked last at 42.5.

Could Australia become the top-rated super system if the compulsory super rate is increased?

Yes. The article says Australia could emerge on top if the government goes ahead with plans to lift the compulsory super savings rate (the Superannuation Guarantee) from 9% to 12%, which would boost retirement payouts and the system’s standing in the Global Pension Index.

What criteria does the Global Pension Index use to rank superannuation and pension systems?

The index combines measures of retirement payout levels, whether a country can afford its scheme over time (sustainability/affordability), and the level of public trust in the superannuation system. It tracks both public and private systems across 16 countries.

What risk did the study highlight about Australian super funds that everyday investors should know?

The study found Australia has the largest exposure to sharemarkets among the global schemes it surveyed, which can leave retirees’ savings vulnerable to wild swings in volatile markets.

How are government reforms and tougher oversight affecting confidence in the superannuation industry?

The article says tougher oversight and 'stronger super' reforms aim to boost confidence in the industry after volatile global markets produced shrinking returns. The changes follow federal recommendations designed to improve supervision of funds and protect members.

What did Mercer senior partner David Knox say about the strength of Australia’s super system?

David Knox described Australia’s system as 'quite a robust system' — relatively well funded with additional savings being set aside and without extreme demographic pressures. He added that increasing the Superannuation Guarantee and boosting workforce participation among older Australians could help make it a 'gold‑standard' system.

How many countries does the Global Pension Index track and which regions are included?

The index tracks public and private pension systems across 16 countries, covering nations from Europe, Latin America and parts of Asia.

What does Australia’s regained No. 2 ranking mean for everyday investors and retirees?

The ranking indicates Australia’s superannuation system is generally robust and relatively well funded, which is reassuring for savers. At the same time, the study’s note about heavy sharemarket exposure is a reminder that market volatility can affect retirement balances, and that policy changes—like a higher Superannuation Guarantee—could further strengthen future retirement incomes.