INCREASING the superannuation contribution rate and the retirement age will be important to help ensure the ongoing sustainability of Australia's superannuation scheme.
Rodney Maddock, of the Australian Centre for Financial Studies, said the key to maintaining our "robust" system was careful planning and "brave leadership" from governments.
Professor Maddock made the comments following the release of the 2016 Melbourne Mercer Global Pension Index, which saw Australia maintain its third placing and B+ rating.
Denmark retained its number one position for the fifth year.
"Australians are living longer, living larger portions of their life in retirement, and spending more in retirement, so we need to be well placed to ensure fulfilling, adequately-funded retirements," Professor Maddock said.
The global index acknowledges there are areas for improvement in all countries' retirement income systems.
Possible measures to further enhance Australia's system include:
- Introducing a requirement that part of the retirement benefit must be taken as an income stream.
- Increasing the labour force participation rate at older ages as life expectancies rise.
- Introducing a mechanism to increase the pension age as life expectancy continues to increase.
- Increasing the minimum access age to receive benefits from private pension plans so that access to retirement benefits is restricted to no more than five years before the age of pension eligibility.
This year's report looked at the impact of rapidly ageing populations and countries' preparedness to deal with the financial pressures this presents.
It includes a projected old age dependency ratio, which report author Dr David Knox, a senior partner at Mercer, says will raise alarm in many regions.
"The range of the ratio is stark - predicting that in South Africa there will be one retiree for every seven people of working age, while in Japan the number drops to one retiree for every 1.44 people of working age by 2040," he said.
Australia is projected to have about one retiree for every 2.4 workers by 2040.
The index shows the relative position of each country's old age dependency ratio in respect to:
- The labour force participation of workers aged 55-64 and workers aged 65 and over.
- The increase in the labour force participation rate of people aged 55-64 from 2000-2015, which determines whether the country is actually experiencing more people working at older ages.
- The projected increase in the retirement period from 2015-2035, allowing for the expected increases in life expectancy and the projected increase in the normal eligibility age for social security or the publicly funded pension.
- The level of pension fund assets expressed a percentage of GDP in each country.
