Pension ranking pulled apart

Retirement Income Review submissions highlight shortcomings.

happy retiree

Australia has the third best pension and retirement system in the world, according to research by HR consulting firm Mercer and Monash Business School. But the Actuaries Institute is the latest to flag a series of “shortcomings” in its submission to the government’s retirement income review.

The Mercer and Monash analysis, which looked at the strength, quality and fairness of retirement income systems in 37 countries (representing more than 63 per cent of the world’s population), returned Australia to third spot after it was displaced by Finland last year.

The Netherlands (a $1.5 trillion pension industry) again claimed top spot with Denmark second. Finland, Sweden and Norway were ranked behind Australia.

The index benchmarks retirement income systems across more than 40 indicators, including how generous systems are in their pension benefits, the quality of the country’s public and private sector pensions, the length of expected retirement benefits, pension communication and governance, and how pension plans and retirees are protected.

Australia’s $2.9 trillion superannuation industry scored consistently well in most areas, but the analysis was critical of our “relatively tough” assets test on the Age Pension.

In 2017, the government changed the assets test so that retirees lost $3 instead of $1.50 of pension per $1000 of assets above the threshold. The change to the taper rate has drawn criticism from many sources ever since.

Economist Sean Corbett told YourLifeChoices: “You really have to wonder why the government introduced a change that discourages people from providing their own retirement income and instead relying more heavily on the Age Pension.”

A report released by the Actuaries Institute from Mercer’s David Knox, Rice Warner principal Michael Rice and University of NSW associate professor Anthony Asher says the assets test taper rate provides “little (if any) reward for saving”. They all support a reduction on the taper rate to $2 or $2.25.

Mr Knox added that Australia would also benefit from “better integration between the Age Pension and superannuation”, because there were not enough incentives for individuals to contribute.

“The overall system needs to provide clear additional benefits from making extra contributions,” he said.

The Actuaries Institute says Australians need a much clearer understanding of how much money they can expect to get during retirement, how this changes as their contributions rise and fall, how much Age Pension they might receive, what impact investment returns have on outcomes, and how super and the Age Pension interact with aged care.

YourLifeChoices’ submission to the retirement income review urged the government to:

  • Increase the base rate of the full Age Pension to an amount that better aligns with the actual cost of retirement.
  • Limit housing stress by increasing the rental supplement to a more realistic amount.
  • Reduce the penalty for earning income, e.g. remove the income test attached to the Age Pension.
  • Encourage a higher mature adult workplace participation.
  • Consider capping the number of legislative changes to retirement income or to grandfather all legislative changes to support longer-term planning.
  • Review the 2017 changes to the taper rate to encourage people to save and self-fund.
  • Review the role and efficacy of Centrelink as the delivery agency for the Age Pension.

Do you believe our pension and retirement system deserves its third placed ranking?

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28th Feb 2020
Overhaul Centrelink as the delivery agency for the Age Pension. This change alone will solve many of the problems with the aged pension.
An overhaul of Centrelink might also solve some of the problems other Australians are having with Centrelink. I know someone else who battled Centrelink for four months. He was a job seeker, but he didn't want to draw the dole. He just wanted to try and find work without their help first. He applied for a low income card in the interim so he could get concessions for tickets etc. After nine weeks, they sent him correspondence saying they wouldn't give him a low income card because he was a migrant! They made this claim that he was a migrant even though he'd presented his West Australian birth certificate showing he was born in the hospital that is 2 kms from the Centrelink office he was standing in. Not only that, he's a 5th generation Australian who has never even been out of the state. He doesn't even have a passport. So take heart. Young people who are trying to improve themselves and get their first real jobs have just as many issues with Centrelink as the aged.
28th Feb 2020
Job service providers are totally useless for anyone over 50. Total waste of time, they would prefer you don't exist. 'Service' should be removed from their name.
28th Feb 2020
I agree with the submission but I wont be holding my breath to see it succeed. The pollies are only interested in looking after themselves.
pedro the swift
28th Feb 2020
Third best? What are these people on? They obviously only considered pollies perks and pension, not real pensioners. This study is just so much bullshit.
28th Feb 2020
1st Mar 2020
Agree abdlolute bullcrap
Horace Cope
28th Feb 2020
"Do you believe our pension and retirement system deserves its third placed ranking?"

I really don't know as I am a humble retiree with no qualifications to allow me to challenge the findings of the Mercer and Monash Business School. What I do know is that anytime Australia ranks well in world achievements we usually pop the champagne corks. But the naysayers have rushed in to nitpick around the edges to push their own personal theories and this doesn't surprise me at all.

As Keating's wonderful super scheme achieves maturity, that is when everybody retired has been working their whole life having super put aside, Australia's rating could even be at #1. People may bleat about other countries that pay everyone over a certain age a pension, regardless of circumstances, but details of what that payment is as against the cost of living in those countries is curiously omitted.

28th Feb 2020
Can i just say that I think our pension/superannuation system is distorted and in many aspects does not display balance.

The biggest oversight is as with this article we only consider pensioners or part pensioners. I believe that whenever this matter is raised the self funded retiree aspect needs to be included. Not simply in the article but more importantly by the Government considerations and legislation.

It is extremely frustrating if you are a self funded retiree and considerations/discussion are only given to pensioners or part pensioner circumstances. As a self funded retiree od 74 years how about inclusive consideration because of my age. My assets through diligence and work based retirement income cannot be adjusted to below asset and or income threshold limits.
But that excludes me from any consideratiions of due diligence for work and life management through my working years. An Opal card is my ONLY Society assistance. And the only avenue of 'market considerations' for maintaining my financial values is extremely stressful. Exacerbated by such things as coronavirus market impact and >1% interest rates.

Some overall consideration, recognition, and inclusion, of work application and life asset management for people of a certain age would not go astray.

Furthermore, and I do say so at risk, being an old white male is also a risk for a sense of alienation from within our Society, which has total dedication to the female portion of our Society, and virtual no consideration of men as a group other than retribution, for what, I am not sure. With exclusion from any concessions for example in Rates, car registration, water, electricity, being a SFR, mirror imaging your self sufficiency through having worked and not blown your income, is of little benefit

Overall there is a cross over of matters that need consideration within our Society. AND the consideration of pensioners/part pensioner considerations, without inclusion of links with SFR's within those considerations and implications is a grave oversight. Similarly singular dedication for matters for women only considerations is equally erroneous.

To ALIENATE the older white men who made massive contribution to establishing our culture is also equally erroneous.

Our Society has 'escape fall' convenience for the easy way out.
28th Feb 2020
Agree SFR's often "penalised" for their financial acumen whilst a lot of others get full welfare and a myriad of other benefits denied to the SFR. Not fair nor equitable IMHO
28th Feb 2020
Olde, if you are fully self funded, you're doing ok. If you are missing out on concessions incuding the health card it is due to assets and income and absolutely nothing to do with gender.
28th Feb 2020
Olde - you should have thought about that some years ago. The writing was on the wall when Keating introduced the income and asset tests. You are the same age as myself roughly and we grew up being told that we are going to get the pension at 65. We started spending more in the last 20 years than we would have done. Never minded taxation but missing out on all age benefits after working all these years would be stupid. Super will never be good enough if we are allowed to raid it every 6 months or so by claiming hardship. That is what most of my workmates did periodically during my 10 years working in the hospitality industry.
28th Feb 2020
What our founding fathers said in parliament in 1908:

We wish to honour the sentiments of the legislators who introduced the Age Pension in Parliament in 1908. When it became law, it was commended with the following words: “… it removes the idea of old-age pensions from any suggestion of a charitable allowance. An old man, who has done his duty as a citizen for 25 years (is) as much entitled to a pension as a commander-in-chief or a chief justice.”
End Quote: _____

The pension was a reward for service. It should still be considered in this light. It is not a handout.

Therefore, a pension is not welfare.

But modern politicians have stuffed it up completely

It is time to kill off this insane hugely expensive pensioner whacking bureaucracy.

It is time for all of us (yes that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

Help scrap it now. Become a hero.

Even the UK and poorer New Zealand has a NO ASSET pension, so it is cheaper and user friendly.

Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be hassled by their crazed robo-debt scam and then waste even more time in the 3 million people waiting queues and more lost calls?
28th Feb 2020
Hope someone will hear you one day - have my doubts but thank you for putting this up now and then. Younger people can learn not to have too many visible assets in their later years as saving does not pay.
1st Mar 2020
Trust the goverment not .give with one hand and take with the other.change whatever the last gov put in place just like that. Liers rorters con men and women . Gonna be for the people till they get to canberra.Then they get to join the big club with all the perks and lurks that go with it.PEOPLE WHAT PEOPLE ,They want what ????? ???
28th Feb 2020
Two missing pieces because too sensitive for LNP to raise. First is inclusion of home is assets test. I know this is a sensitive issue but it’s simple. People with the same amount of assets should be treated the same. The attempt to fix this is to have complex system of rent
assistance etc. would be simple if age pension based on value of total assets. Assets can be bought and sold so why treat people with house not with house etc. differently. Secondly pension assets accumulated in super system especially SG should not be available as lump sum other than in hardship cases or nominal amount on retirement. I am also doubtful that any reforms will be other than compromising for political reasons rather than what is simple fair and sustainable.
28th Feb 2020
Spoken by someone without their own home. The idea of including the family home in the Asset test has been done to death, and death it would spell for any political party who brought it in. Often people rely on their lump sum to pay off the mortgage, buy a car, home improvements and to have a nest egg for the future including rising health care costs.
28th Feb 2020
The Green Eye of envy is alive and well with Macheke. Squeeze all the people who have something that I do not have. Real hand-to-mouth living mentality.
28th Feb 2020
Do those with a mortgage have that taken off their assessed home asset? If a person only own half the home, they can't have the full 100% assessed as 'their asset' can they? the other half is a bank asset, and they get a tax cop for it.

Can't have it both ways, although the alternative is to have a 'mortgage assistance' component added to pension.

I think this is too complex given the vast range of housing prices in various areas.
28th Feb 2020
We need another 1789
28th Feb 2020
Mercer is a fund manager so need to allow for some bias here. When fund managers associate with a seat of learning by way of funding, then it's fairly common for reports to be less than objective. I thought Monash was better than this, but as we have seen from the coronavirus assistance given to returning Chinese students, our further education systems are so starved of monies from Government that they rely on foreign students or corporate funding to pay the bills. We live in a "buy a favourable report" or a "buy a degree" it seems until thsystem breaks apart and re realise the folly of neoliberalism.
Sooty from Marketing
28th Feb 2020
The 2017 changes to the Pensioner Assets Test was orchestrated by Scott Morrison when he was Social Services Minister. As noted in this article “You really have to wonder why the government introduced a change that discourages people from providing their own retirement income and instead relying more heavily on the Age Pension.”
Well remember budget emergency, lifters and leaners, the old age pension is welfare, trickledown economics ?
Well Scotty Morrison all nick names appellations and cognomens such as Slomo, Liar from the shire, prime minimal, sooty, Scotty from Marketing are well deserved for poor judgement and mismanagement.
28th Feb 2020
MaH, you are correct on all counts. The major leaners in this country are politicans of all colour and the generations of some families who have never worked at a job for a day in their lives, receive the dole and then a pension for life.

ScoMo "Scumbag" along with "Fat Boy" Joe Hockey are two of the most selfish, egotistical and nasty politicans Australia has ever had the misfortune to elect.
28th Feb 2020
It’s really difficult to assess pension systems across different countries, most countries pension system cannot be compared accurately, most of the Nordic countries and Germany have a system that requires a much larger contribution than ours although there systems are similar to our Superannuation with the exception being that their system requires a compulsory contribution, in Germany they pay 18% of their salary into the pension fund, which I believe is also topped up by the government on retirement, this gives them a pretty good pension, if you added your income from your super to your pension I think our pension would be comparable, some of the Nordic countries also receive other benefits, so we are not comparing apples with apples, just my opinion of course and it represents my situation, not everyone is in the same boat.
28th Feb 2020
Well said Jim - pretty accurate!
28th Feb 2020
Another load of crap put out by People who never have to use the system because they are paid so much . All these Economists , Business School are overpaid leaches
28th Feb 2020
I vehemently agree to the contention that the Job service providers are totally useless for anyone over 50. Total waste of time, they would prefer you don't exist. "Employment Advisers", with due respect for them, most times are least competent for the job, having no respect or empathy for clients (many much more capable, better qualified and experienced than the "Advisers") and worse, not having and/ or following basics of customer service. It is not absurd to say, the Employment Service Providing Scheme (Job-active) is designed to provide jobs to such undeserving people, not to genuine job-seekers.
29th Feb 2020
2nd Mar 2020
Hank Jongen doesn't care; because he'll be one of the "fat cats, retiring on ill-gotten gains!"

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