Holland once again leading retirement system in Global Pension Index

Australian Centre for Financial Studies publishes the second Melbourne Mercer Global Pension Index

The Second Melbourne Mercer Global Pension Index (Index) published by the Australian Centre for Financial Studies (ACFS) today, highlights both the strengths and weaknesses of the Australian retirement system in an international context. In the 2010 Index, Australia ranks fourth out of 14 countries.

The Index, which is compiled in conjunction with Mercer, examines the adequacy of benefits, the sustainability and the integrity of retirement systems.  The other 13 countries considered are the Netherlands, Sweden, Canada, UK, Chile, Singapore, USA, Germany, Japan and China, and for the first time Switzerland, Brazil and France.

While Australia’s strengths in terms of widespread mandatory superannuation coverage, a strong regulatory system and large pool of invested funds contribute to its strong result, there is room for improvement. Weaknesses include the paucity of retirement income products to deal with longevity risk, and the small average scale of superannuation funds which leads to a cost disadvantage, especially with respect to large European funds. The inclusion of an operating cost factor in the 2010 Index has highlighted the latter.

The leading retirement system in the Index once again is the Netherlands, which has the advantage of a very well established retirement system with higher benefit levels, very large industry wide defined benefit schemes, and a consequent low cost structure. The Dutch index value increased from 76.1 in 2009 to 78.3 in 2010 due primarily to recognition of the level of mandatory contributions actually operating within the country.

Source: Australian Centre for Financial Studies media release, 20 October 2010