Key Takeaways
- • Australia lost its top ranking in Asia Pacific for the first time in the Mercer CFA Institute Global Pension Index, with Singapore's pension system overtaking it after a rating improvement.
- • Australia's superannuation system retained a B+ rating in the 2024 index, which examined 48 retirement income systems covering 65 per cent of the world population.
- • Mercer senior partner and lead author David Knox said Australia will stay at B-plus without a greater policy focus on retirement income, calling that a government policy decision.
- • Knox urged super funds to include retirement income projections in annual member statements and called for unisex annuities to address the gender gap.
- • The Netherlands, Iceland, Denmark and Israel retained A ratings; the UK received B, Canada B and the US C+.
Summary
Australia is no longer the top-ranked retirement system in Asia Pacific, according to the 2024 Mercer CFA Institute Global Pension Index, the first time that has happened since the index began ranking pension systems. The index examined 48 retirement income systems covering 65 per cent of the world population, with Vietnam entering the ranking this year. Singapore's Central Provident Fund rose to the top of the Asia Pacific region, helped by improved member communications and the prevalence of defined benefits. Australia's superannuation system retained its B+ rating.
Presenting the findings at a CFA Society event, Mercer senior partner and lead author David Knox said Australia has one of the best defined contribution components globally but lacks a retirement income focus. "Without that focus, we are going to stay B-plus. That's a government policy decision," he said. APRA and ASIC continue to press funds to develop concrete retirement strategies under the Retirement Income Covenant, in effect since mid-2022, though regulators have been underwhelmed by industry responses, according to a recent review of the covenant's progress.
Knox also called on funds to include income projections in member annual statements, noting that roughly one third of pension systems worldwide require this while Australia does not. On gender, he argued unisex annuities would close a remaining gap, since Australian annuity pricing varies by gender reflecting women's longer average lifespans, whereas Knox contends lifestyle and economic class are the key drivers of life expectancy. He also suggested a government super contribution for carers, following recent legislation to pay super on parental leave.
The Netherlands, Iceland, Denmark and Israel retained A ratings. The UK, which is undergoing significant pension reforms, received a B, Canada a B, and the US a C+. The index ranks systems on adequacy, integrity and sustainability.
Presenting the findings at a CFA Society event, Mercer senior partner and lead author David Knox said Australia has one of the best defined contribution components globally but lacks a retirement income focus. "Without that focus, we are going to stay B-plus. That's a government policy decision," he said. APRA and ASIC continue to press funds to develop concrete retirement strategies under the Retirement Income Covenant, in effect since mid-2022, though regulators have been underwhelmed by industry responses, according to a recent review of the covenant's progress.
Knox also called on funds to include income projections in member annual statements, noting that roughly one third of pension systems worldwide require this while Australia does not. On gender, he argued unisex annuities would close a remaining gap, since Australian annuity pricing varies by gender reflecting women's longer average lifespans, whereas Knox contends lifestyle and economic class are the key drivers of life expectancy. He also suggested a government super contribution for carers, following recent legislation to pay super on parental leave.
The Netherlands, Iceland, Denmark and Israel retained A ratings. The UK, which is undergoing significant pension reforms, received a B, Canada a B, and the US a C+. The index ranks systems on adequacy, integrity and sustainability.
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