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Super second spot buoys retirement savings scheme

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

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

However, Australia could emerge as a clear winner if the government pushes ahead with its plans to lift the compulsory superannuation savings rate to 12 per cent from 9 per cent, according to 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, a 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. The Netherlands rated 77.9, China was last on 42.5.

The study found Australia had the largest exposure to sharemarkets among global schemes, which can leave retirees' savings vulnerable to wild swings. At the other end of the spectrum, many assets of pension schemes, as in Singapore, are tied up in government bonds, leaving little room for income growth.

This is the third year the index has been compiled, providing politicians and regulators with a key measure for the standing of Australia's superannuation system.

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 industry, when volatile global markets have produced shrinking returns, and follows recommendations from the federal government's "stronger super" reforms.

Some of Europe's wealthiest countries France and Germany scored poorly on the index even though they are regarded as having relatively generous superannuation systems by global standards. Their weak point is whether their pension schemes can be sustained over the long term. Evidence of this can be seen in other parts of Europe where governments are struggling under too much debt and are under pressure to sharply curb spending.


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