The Australian Institute of Superannuation Trustees (AIST) has welcomed findings that Australia’s retirement income system – of which compulsory superannuation is an integral component – has once again rated highly on a world scale.
Australia achieved third place in the 2019 Melbourne Mercer Global Pension Index with a B+ rating, ranking behind the Netherlands and Denmark who both achieved A grade status.
AIST CEO Eva Scheerlinck said it was pleasing that the strength and success of Australia’s super system had been acknowledged, adding that with a few key improvements, Australia could achieve the coveted A grade rating.
“Importantly, this Report ranks Australia highly, but it also reinforces that we cannot become complacent when it comes to improving the adequacy of retirement incomes. We must stick to the legislated timeline to increase the compulsory super rate to 12% by 2025.”
Both the Netherlands and Denmark have a net contribution rate of 12% while another eight countries scored a higher adequacy rating than Australia, at 70.1. In terms of retirement income adequacy, Australia ranked 11th out of 37 countries.
“We believe that the legislated increase in the Super Guarantee rate is key to improving our adequacy rating, and without it we risk slipping down the scale.”
Ms Scheerlinck said the Index also reinforced the need to moderate the Age Pension taper rate to improve fairness for middle income earners. The Coalition Government changed the taper rate in 2017 so that for each $1000 worth of assets above the full pension threshold, the age pension was cut by $3. Previously, the taper rate was $1.50 per $1000.
“The severity of the taper rate is not only unfair to many retirees but also a threat to the integrity of our savings system as it does not provide enough benefit for saving more. AIST is calling on the Government to moderate the taper rate in the next 2020 budget.”
“In terms of incentives to save, hard-working Australians deserves a better deal from our super system.” Ms Scheerlinck said.