• Sustainability of some current systems is under threat
  • Denmark maintains #1 position for sixth year
  • Index expanded to include Colombia, New Zealand and Norway
  • Australia with B+ rating has room for improvement

The Hon Ben Carroll MP, Minister for Industry and Employment, announces MMGPI 2017 results

On Monday 23 October, ACFS, Mercer Consulting and the Victorian Government co-hosted the launch of the ninth edition of the Melbourne Mercer Global Pension Index (MMGPI) Report. The Hon Ben Carroll MP, Minister for Industry and Employment, announced the Index results for 2017, and Diane Maxwell, New Zealand Retirement Commissioner, spoke about retirement income policy and the challenge of building financial literacy amongst vulnerable groups.

As the social and economic effects of population ageing grow, nations’ capacities to effectively provide financial security in retirement become progressively more critical. A public measure of this readiness, the MMGPI’s global profile has also increased steadily since its inception in 2009. This year, the 9th edition of the report assessed the retirement income systems of 30 nations across six continents, covering more than half of the global population.

Despite retaining its third-place ranking behind Denmark and The Netherlands, Australia sustained a slight drop in the rating of its pension system in 2017, for the third consecutive year. This minor slip was the result of a reduction in the household savings rate, and the inclusion of a new question in the sustainability sub-index. This question measured countries’ real economic growth, and resulted in the ‘sustainability’ rating of a number of the more developed nations falling. These included first- and second-placed Denmark and The Netherlands which both lost their A-grade ratings for the first time, despite having significant pension assets and high mandatory contribution rates. Increasing the Superannuation Guarantee to the proposed 12% and introducing retirement income stream products could improve the ‘adequacy’, and overall rating, of Australia’s pension system.

Diane Maxwell, New Zealand’s Retirement Commissioner

It was also noted that lessons could be learnt from New Zealand, which achieves high levels of labour force participation at older ages – 43% of people aged 65-69 are employed. If Australia wants to attain similar outcomes, it will need to invest in the health and (re)training of older workers. Employers will also need strategies to manage their ageing workforces. New Zealand’s and Australia’s pension systems also face common challenges, including the disadvantages faced by gig-economy workers. In both countries, a rising proportion of workers are self-employed and do not contribute to their superannuation which risks their retirement outcomes.

 

RELEASE OF THE INDEX IN SYDNEY

Sally Loane – CEO, Financial Services Council

To complement the launch event in Melbourne, the Index was presented at an event held in Sydney the following day. The event was hosted by the Financial Services Council (FSC), and much like the Melbourne Launch event, featured the release of the findings of the Index, followed by a discussion amongst senior representatives of the superannuation and funds management industry.

 

A major theme of this discussion was the need to engage younger generations with superannuation. It was noted that superannuation funds are more likely to effectively connect with millennials by developing robust online digital products and services – an approach that has already been adopted by some of the new digital start-up super funds. It was stressed that engagement of this demographic was critical to maintaining adequate coverage, and enhancing the long-term financial sustainability of superannuation.

 

Download the 2017 Melbourne Mercer Global Pension Index Report