Key Takeaways
- • Australia's retirement income system retained a B+ grade in the 2023 Mercer CFA Institute Global Pension Index, a rating it has struggled to move beyond since the index was established in 2009.
- • The Netherlands, Iceland, Denmark and Israel earned A grades, with all four requiring that most of a retiree's benefit be taken as a pension or income stream.
- • Mercer senior partner David Knox, the report's lead author, said Australia's superannuation system excels at accumulation but is not sufficiently geared towards decumulation.
- • Knox called for a compulsory income stream for retirees with balances of roughly $200,000 or more, to be introduced gradually.
- • The index covers 47 retirement income systems, representing about 64 per cent of the world's population, with Botswana, Croatia and Kazakhstan added this year.
Summary
Australia's retirement income system has again been graded B+ in the 2023 Global Pension Index, jointly produced by Mercer and the CFA Institute. The rating has persisted since the index's launch in 2009. Australia's overall index score rose this year, driven by the rising superannuation guarantee and the sector's growing contribution to the economy, but the grade did not change.
The Netherlands, Iceland, Denmark and Israel were rated superior and received A grades. Speaking to Investment Magazine, David Knox, senior partner at Mercer and lead author of the report, said Australia's superannuation system has been strong at accumulation but remains insufficiently oriented toward decumulation. He noted that the top-ranked countries all require most of a retiree's benefit to be taken as a pension or income, whereas Australia imposes no such requirement. The index assesses systems on adequacy, sustainability and integrity. The 2023 edition compares 47 systems covering around 64 per cent of the world's population.
The findings follow a critical report from regulators ASIC and APRA, which cited "a lack of progress and insufficient urgency" as super funds work to meet obligations under the retirement income covenant. Knox attributed the slow progress to the early stage of implementation, noting that developing new retirement products cannot be done within six or 12 months. He said the covenant and related regulatory measures are the right steps but not the final ones.
Knox called for a compulsory income stream for all retirees with a reasonable super balance, which he suggested should be $200,000 or above. He recommended a gradual introduction so that people nearing retirement under current rules are not disadvantaged, and said that most balances above that threshold should be held in an income stream, which he described as a regular income, pension, annuity or spending money. "The purpose of superannuation is to provide people with money in retirement. It's that simple," he said.
The Netherlands, Iceland, Denmark and Israel were rated superior and received A grades. Speaking to Investment Magazine, David Knox, senior partner at Mercer and lead author of the report, said Australia's superannuation system has been strong at accumulation but remains insufficiently oriented toward decumulation. He noted that the top-ranked countries all require most of a retiree's benefit to be taken as a pension or income, whereas Australia imposes no such requirement. The index assesses systems on adequacy, sustainability and integrity. The 2023 edition compares 47 systems covering around 64 per cent of the world's population.
The findings follow a critical report from regulators ASIC and APRA, which cited "a lack of progress and insufficient urgency" as super funds work to meet obligations under the retirement income covenant. Knox attributed the slow progress to the early stage of implementation, noting that developing new retirement products cannot be done within six or 12 months. He said the covenant and related regulatory measures are the right steps but not the final ones.
Knox called for a compulsory income stream for all retirees with a reasonable super balance, which he suggested should be $200,000 or above. He recommended a gradual introduction so that people nearing retirement under current rules are not disadvantaged, and said that most balances above that threshold should be held in an income stream, which he described as a regular income, pension, annuity or spending money. "The purpose of superannuation is to provide people with money in retirement. It's that simple," he said.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.