Australia's retirement income system has slid to the sixth place among 48 pension systems worldwide in 2024 from the fifth best among the 47 markets in 2023, according to the Mercer CFA Institute Global Pension Index 2024.
The Australian global pension index value dipped to 76.7 in 2024 from 77.3 in 2023, primarily due to reduced net pension replacement rates.
Australia’s retirement income system comprises a means-tested age pension (paid from general government revenue); a mandatory employer contribution paid into private-sector arrangements and additional voluntary contributions from employers, employees, or the self-employed paid into private-sector plans.
Recommendations
The Mercer CFA Institute Global Pension Index report says that Australia’s overall index value could be increased by:
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Moderating the assets test on the means-tested age pension to increase the net replacement rate for average income earners
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Introducing a requirement that part of the retirement benefit be taken as an income stream in most circumstances
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Introducing a government superannuation contribution to primary carers of young children
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Introducing a requirement to show benefit projections on members’ annual statements
These recommendations mirror those proposed in the 2023 and 2022 reports.
Summary of retirement income system index scores and ranking
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|
Summary
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2024
|
2023
|
2022
|
|
Overall rank
|
6 (of 48)
|
5 (of 47)
|
6 (of 44)
|
|
Overall index score
|
76.7
|
77.3
|
76.8
|
|
|
|
|
|
|
Adequacy sub-index rank
|
21
|
20
|
20
|
|
Adequacy sub-index score
|
68.4
|
70.7
|
70.2
|
|
|
|
|
|
|
Sustainability sub-index rank
|
5
|
5
|
5
|
|
Sustainability sub-index score
|
79.5
|
78.4
|
77.2
|
|
|
|
|
|
|
Integrity sub-index rank
|
7
|
6
|
6
|
|
Integrity sub-index score
|
86.1
|
86.1
|
86.8
|
|
Source: Mercer CFA Institute Global Pension Index 2024
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The Mercer CFA Institute Global Pension Index uses three sub-indices — adequacy, sustainability, and integrity — to measure each retirement income system against more than 50 indicators, such as home ownership, economic growth, and operating costs.
Vietnam is the only addition this year to the pension markets listed in the Index, raising the total number of systems evaluated from 47 to 48.
The study shows that the Netherlands, Iceland, Denmark, and Israel continue to be assessed as having the best retirement income systems worldwide, each of them receiving an ‘A’ grade in 2024, with scores exceeding 80 — similar to 2023.