As the government undertakes its review of the Australian retirement income system, a new report has ranked Australia’s pension system third globally.
Receiving a grade of B+, Australia ranks behind only the Netherlands and Denmark in the 2019 Melbourne Mercer Global Pension Index. According to the Index, the B+ denotes a system that “has a sound structure, with many good features”, with some areas for improvement.
The Index assesses pension systems according to three key indicators: adequacy, sustainability, and integrity.
Under the ‘adequacy’ banner are factors including benefits, savings, system design, and tax support. Meanwhile, ‘sustainability’ takes into account the likes of demography, contributors, total assets, and pension coverage; and ‘integrity’ focuses on factors including regulation, governance, protection, and operating costs.
Receiving an overall Index score of 75.3, the Australian system was awarded a score of 70.3 for adequacy, 73.5 for sustainability, and 85.7 – or an A – for integrity.
The report outlined a number of measures which could boost the Australian system’s score:
A number of these measures may be addressed by the government’s review of the retirement income system.
The review is looking into the three pillars of the existing retirement income system: the Age Pension, compulsory superannuation, and voluntary savings. The review will cover the current system and how it will perform in the future as Australians live longer and the population ages.
The release of the Index follows research from Challenger earlier this year that found Australia’s super system is, for the most part, delivering on its intended goal of providing income in retirement to substitute or supplement the age pension.
According to Challenger, there’s now $800 billion in the super accounts of members aged over 65. This figure represents over 28 percent of total assets in the super system.
The average balance per member in retirement is $305,000 for those in not-for-profit funds, like Qantas Super, compared to an average balance of $255,000 for members in retail super funds. The average balance for Qantas Super members aged 65 and above is $390,000.
Along with trust in their super funds, confidence in a financially comfortable retirement is also low for most Australians.
Overall, the RCI measured confidence at an average of 5.4 out of 10. While up from last year’s average of 5.1, the continued lack of confidence from the same groups, including women and those aged between 30-49, from year to year is particularly concerning.
A recent study by Stockspot revealed that 15% of Australians didn’t know how much super they have. People who have greater clarity of their current situation are generally better placed to make decisions about their future.
One of the most common questions we get from members is “how much super will I need to have a comfortable retirement?” Using calculators like the ASFA Super Guru Retirement Tracker can help you work out what income you are likely to have from super and the age pension when you retire. This information can help you decide if you should make additional contributions to super and how long you may need to work in order to have the income you want in retirement.
The ATO’s latest estimate reveals there is $20.8 billion in lost and unclaimed super. You can quickly and easily check for any lost super by logging into your account and clicking ‘Find My Super’, or via the myGov website.
Australians often have death, disability and some even have income protection insurance built into their super. It’s important to know what insurance you have to understand your level of protection, the premiums you are paying and whether you need more or less insurance cover.
Contributing to many Australians’ apathy toward super is a lack of knowledge around how super works and its importance in providing income in retirement. Online education tools, like our Learning Hub, can help people improve their knowledge so they can make more informed, confident decisions about their financial future.
Welcome to Super Chats, a podcast helping you learn about super. We know super can be complicated, so with Super Chats we want to demystify superannuation so you can tell your binding beneficiaries from your non-concessional contributions.
We asked a few members of the Qantas Super team why they started making voluntary contributions, and the benefits they’ve seen in making those contributions.
According to the Association of Superannuation Funds of Australia (ASFA), around 80 percent of women are currently retiring with insufficient super savings to fund a comfortable lifestyle, with the average balance for women at retirement sitting at around $85,000 less than the average for men. But there are a number of quick, easy things women can do to take control of their super.
If you need help with making a decision about your super, you can get simple advice over the phone or face to face. It’s included as a part of your membership so there’s no extra cost.
