Government action needed to avoid lower retirement living standards
Today’s release of the 2020 Mercer CFA Institute Global Pension Index which saw Australia’s super system record a drop in ranking across two key categories highlights the need for new policy measures and a commitment from the Government to the legislated timeline to increase the super compulsory rate to 12%, the Australian Institute of Superannuation Trustees (AIST) said today.
With Australia slipping in the overall global ranking from 3rd to 4th, and only ranking 14th for retirement income adequacy, AIST CEO Eva Scheerlinck called on the Government to address the gap in retirement savings created by the COVID pandemic.
“Previous analysis by Mercer and AIST has shown that low paid, young Australians will bear the brunt of an estimated $100 billion shortfall in retirement savings due to the COVID pandemic,” Ms Scheerlinck said.
“The COVID early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement,” she said. “Today’s release from Mercer confirms that poverty in retirement is a real possibility for millions of Australians.”
The 2020 Index report notes that the decision by some countries – including Australia – to allow temporary access to pension savings in response to the pandemic has materially impacted the adequacy, sustainability and integrity of those pension systems.
The two top retirement systems in the Index, the Netherlands and Denmark, have not permitted early access to pension assets. Equally concerning is the finding that COVID has increased gender inequality in pension provision.
“The long-term impact of this will mean older people, especially women, will need to work longer and have to settle for a lower standard of living in retirement,” Ms Scheerlinck said.
AIST’s pre-Budget submission in August called for the Government to commit to the legislated increase of the compulsory super rate to 12% and a one-off super contribution of up to $5000 for low income earners who were eligible to access the COVID early release scheme.
The Global Pension Index weightings are 40% adequacy, 35% sustainability and 25% integrity.
