Key Takeaways
- • The Mercer CFA Institute Global Pension Index ranked Australia's pension system seventh in 2025, behind the Netherlands, Iceland, Denmark, Singapore, Israel and Sweden, with an overall grade of B+.
- • Australia's index value rose slightly from 76.7 in 2024 to 77.6 in 2025, driven mainly by higher mandatory contributions and updated IMF economic growth data.
- • The report identifies adequacy as the main drag on Australia's ranking and recommends four areas for improvement, including a government superannuation contribution for primary carers of young children.
- • Mercer's lead author Tim Jenkins argues governments should favour attractive investment options, transparency and sound governance over mandates, while CFA Institute's Margaret Franklin warns that directing pension capital toward national priorities must be weighed against fiduciary duty.
Summary
According to a global report from Mercer, pension systems with no or limited restrictions tend to perform better. The Mercer CFA Institute Global Pension Index placed Australia's pension system seventh in 2025, behind the Netherlands, Iceland, Denmark, Singapore, Israel and Sweden. Australia scored a B+, which the index describes as a sound structure with many good features but some differentiating areas for improvement. Its total ranking was held back by the adequacy of the system.
The report recommends four improvements for Australia. First, it suggests focusing on retirement income as the primary purpose of superannuation, which could raise the overall index value. Second, it proposes moderating the assets test on the means-tested age pension to increase the net replacement rate for average-income earners. Third, it calls for raising household savings and reducing household debt. Fourth, it recommends introducing a government superannuation contribution to primary carers of young children. The Australian index value increased from 76.7 in 2024 to 77.6 in 2025, primarily due to higher mandatory retirement contributions and updated IMF economic growth data.
Tim Jenkins, lead author of the report and partner at Mercer, said governments should avoid imposing mandates and instead make investment options attractive, promote transparency and sound governance, and collaborate with the private sector to support sustainable retirement systems and economic growth. Margaret Franklin, president and CEO of CFA Institute, which collaborated on the report, said debate over whether governments should direct pension investments toward national priorities makes the responsibilities of fund designers and managers more significant. She warned that such proposals raise difficult questions about balancing national interests with fiduciary duty.
The report noted that rising global uncertainty and growing pension fund assets have led some governments to encourage more domestic pension investment in areas of national priority. It cited the UK, Canada, Australia and Malaysia as countries that have recently encouraged pension funds to support domestic infrastructure and innovation. Franklin added that as public systems increasingly turn to private markets for returns, investment professionals must be prepared to evaluate and integrate these allocations and explain how policy decisions affect long-term outcomes.
The report recommends four improvements for Australia. First, it suggests focusing on retirement income as the primary purpose of superannuation, which could raise the overall index value. Second, it proposes moderating the assets test on the means-tested age pension to increase the net replacement rate for average-income earners. Third, it calls for raising household savings and reducing household debt. Fourth, it recommends introducing a government superannuation contribution to primary carers of young children. The Australian index value increased from 76.7 in 2024 to 77.6 in 2025, primarily due to higher mandatory retirement contributions and updated IMF economic growth data.
Tim Jenkins, lead author of the report and partner at Mercer, said governments should avoid imposing mandates and instead make investment options attractive, promote transparency and sound governance, and collaborate with the private sector to support sustainable retirement systems and economic growth. Margaret Franklin, president and CEO of CFA Institute, which collaborated on the report, said debate over whether governments should direct pension investments toward national priorities makes the responsibilities of fund designers and managers more significant. She warned that such proposals raise difficult questions about balancing national interests with fiduciary duty.
The report noted that rising global uncertainty and growing pension fund assets have led some governments to encourage more domestic pension investment in areas of national priority. It cited the UK, Canada, Australia and Malaysia as countries that have recently encouraged pension funds to support domestic infrastructure and innovation. Franklin added that as public systems increasingly turn to private markets for returns, investment professionals must be prepared to evaluate and integrate these allocations and explain how policy decisions affect long-term outcomes.
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