Australia’s glorious retirement income system, really?
AUSTRALIA might enjoy an impressive ranking in the Melbourne Mercer Global Pension Index (the Index) for one of the last times if the rate of compulsory superannuation contributions does not increase from the current 9.5 per cent.
The Index shows the relative adequacy of pensions from 37 national pension systems, including government funded pensions and private sector arrangements such as superannuation.
The 2019 Index shows Australia with a B+ ranking. That’s good but not as good as leaders Denmark and the Netherlands. Overall, Australia ranked eleventh.
This income adequacy ranking could be improved by increasing Australia’s compulsory superannuation contribution rate, the Super Guarantee (SG) as planned. The Netherlands and Denmark currently both have superannuation contribution rates of 12 per cent of before-tax income. Australia is scheduled to increase the SG to 12 per cent in 2019, but rates were frozen at 9.5 per cent in 2014.
In order for Australians to be confident that they will have a secure retirement, the SG should be increase as planned.