‘Envy of the world’ Aussie super system still needs refinement, industry body warns

With recent findings pointing to a slip in Australia’s global retirement ranking, ASFA has affirmed the need to address continued gaps in local retirement income adequacy. 

While acknowledging that the local super system remains an “envy of the world”, the Association of Superannuation Funds of Australia (ASFA) has conceded that continuous refinement is still needed.

This week, Australia’s retirement system lost its top rank in the Asia-Pacific, with a new report by Mercer and the CFA Institute suggesting it “must do more” to keep its system world class.

Namely, Australia received a score of 76.7 and a B+ grade in the 15th annual Mercer CFA Institute Global Pension Index (MCGPI), slipping to sixth place out of 48 countries.

“We must continue to address gaps in retirement income adequacy, particularly in the face of increasing life expectancies and economic pressures,” ASFA chief executive Mary Delahunty said in response to the findings.

The report further suggested that introducing a government superannuation contribution for primary carers of young children could help improve Australia’s adequacy score.  

On this, Delahunty underscored that the value of caring roles is something that Australians should turn their attention to.

“ASFA is committed to working alongside policymakers to ensure the system adapts to these challenges, securing retirement outcomes for future generations,” the CEO affirmed.  

The industry body noted that recent legislation providing superannuation payments on government-provided paid parental leave represent good progress on that measure.  

Moreover, the findings highlighted that Australia is one of two countries where there are no requirements to take an income stream.

“All but one retirement system in the Global Pension Index’s top 10 has a focus on income in retirement. Australia is the exception,” Dr David Knox AM, lead author of the report and senior partner at Mercer, said this week.

“Greater encouragement of retirement income streams will give ageing Australians more confidence to plan, spend, and in turn, improve their wellbeing in their golden years.”

Regarding the report's suggestion for a compulsory income stream for retirees, ASFA reiterated the importance of member choice and the need for deeper consultation.

“While such a move might positively impact Australia’s ranking in the index, it’s essential that we thoroughly evaluate the potential implications for Australian retirees,” Delahunty said.

“Flexibility in the system remains key, and we believe members should be empowered to make the right decisions for their circumstances, with the support and advice of their super funds.

“As always, we must ensure that any proposed changes to the system prioritise the best outcomes for all Australians to achieve a comfortable and dignified retirement.”