As the Government builds towards its much anticipated retirement income review – even if the exercise appears to be a review rather than a fix – the need for such attention on retirement has rarely been in sharper focus.
Australia’s global retirement ranking is dropping as fast as the official cash rate, sliding three places since last year to ninth.
The Natixis Investment Managers Global Retirement Index assesses 44 countries on factors that drive retirement security, including health, finances in retirement, material wellbeing and quality of life.
Australia’s slide occurred as a result of lower year-on-year scores in quality of life and finances, according to Natixis.
Focusing on the positives, it said that compulsory superannuation lay at the heart of our “relatively high rating”.
Natixis chief executive Damon Hambly said that Australia’s superannuation system was the envy of many countries and provided retirement security; however, balances were too low, particularly given an ageing population.
“As the baby boomers continue to age out of the workforce, the responsibility for contributing to the public pension system will fall more and more onto younger workers’ shoulders,” he said.
“The challenge is that higher old-age dependency ratios can significantly impact public finances as governments struggle to pay for rising social security obligations from falling tax revenues.
“Which is why our retirement age is set to increase to 67 in 2023. Along with Denmark, we are the first of a number of OECD countries to take this step – the United States and Spain are next in 2027.”
Mr Hambly said another potential solution was to encourage more people to continue working longer, potentially past retirement age. But most important of all was helping Australians to understand the importance of investing for the long term, and starting as early as possible.
Natixis managing director for Australia, Louise Watson, said that the gap between super balances for women and men was also having a significant impact on retirement outcomes for Australians.
“Australian women retire with on average 47 per cent less superannuation than men, yet they are likely to live five years longer – so it’s really important that we work together as an industry to find ways of closing the gap,” she said.
“Not just in terms of superannuation balances, but in striving to improve wage equality as well as women’s general level of financial literacy – so more women are empowered to take control of their own financial future.’
Iceland, Switzerland and Norway were the top three for the third straight year. They were followed by Ireland, New Zealand, Sweden, Denmark, Canada, Australia and Luxembourg.
The UK and the US were ranked 17th and 18th in the world respectively. The index concluded that retirees in the Czech Republic and Israel could expect a better standard of living once they stopped work than those in the UK and US.
The report shone a light on Japan’s demographic time bomb, saying its mediocre ranking at 23rd was a result of a mix of very good and very bad outcomes.
Japan has the highest life expectancy of all the countries ranked, giving it a high score for health outcomes in retirement. However, it also has one of the lowest fertility rates in the OECD. As a result, it was one of the lowest performing nations for old-age dependency, government indebtedness and happiness.
Has your retirement suffered in the past year? Can you understand why Australia’s ranking has dropped?
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