RETIREMENT: Australia has the third best pension system in the world after Denmark and The Netherlands, according to a global survey released yesterday by consultants Mercer, although it collected the highest score of the survey for its adequacy. 
The Melbourne Mercer Global Pension Index survey covered the top 25 countries in the world, taking in government and private retirement schemes.
Report author David Knox noted that while Australia had slipped from second to third in the annual survey, changing places with The Netherlands, part of that was because the Economist Intelligence Unit, a major source, had amended the way it calculated households' savings rates.
Collaborator Amy Auster, executive director of the Australian Centre for Financial Studies, said that while the Australian system rated well for "sustainability", that was less a measure of the particular government's budgetary strength than whether it would continue to provide a reasonable level of financial security to retirees.
Dr Knox noted that the survey did look at government debt but that "Australia's is about 30 per cent of GDP, which is not ominous, it's lower than most and indeed lower than Denmark's". He said the big strengths of the Danish system was that it covered every worker, including the self-employed, unlike in Australia. "Also, the Dutch and Danes have between 160 and 170 per cent of GDP in current pension assets, against about 120 per cent for Australia," he added. "They've got more people in their systems and they've got more assets." The survey concluded the Australian system measured best for adequacy because of the relatively high value of our minimum pension as a percentage of the average wage, and the high net replacement rate. That is the relationship between median rather than average working income, and the relative level of retirement income. The report said there were a number of ways by which the Australian system could rate more highly, starting with increasing the compulsory employer contribution levy from 9.5 per cent to the planned 12 per cent.
Ms Auster said the "other area where Australia is weaker is the size of the time gap between pension eligibility and lifespan"."We're not keeping up with moving the pension age upwards and that means Australian retirees are having to stretch their savings out for longer."