Australia’s super system is among the best retirement income systems in the world, a leading industry body has found.
The Financial Services Council’s (FSC) State of the Industry 2019 report found Australia’s superannuation sector delivered among the highest rate of return of any OECD nation’s private pension schemes in the five years to 2017 and is consistently one of the best performers.
Michael Potter, the FSC’s senior policy adviser for economics and tax, said the report showed the comparative strength of the nation’s retirement system.
The report’s findings come at a time when the effectiveness of the superannuation system has been questioned and members of Parliament have gone so far as to defy their leader’s calls for unity and publicly challenge existing super legislation.
But Mr Potter said Australians have little reason to worry.
“The people involved in the super system have known for years just how good it really is,” he told The New Daily.
“We know it’s not perfect, but we do have one of the better ones in the OECD and we shouldn’t overemphasise the issues we do have.”
The report also examined OECD data showing the cost burden of the Age Pension on the federal budget would be the lowest “by some margin” in the years they modelled, 2025, 2035 and 2045.
The OECD analysis showed the Age Pension at just 2.5 per cent of GDP in Australia, compared with an EU average of 11.7 per cent.
Report ‘glosses over’ problems
While the comparisons with other OECD nations (a group that includes the US, UK, Germany and Switzerland) paints a rosy picture, Industry Super Australia (ISA) head of research and campaigns Nick Coates said the report failed to acknowledge key issues facing the sector.
“This report glosses over the fact that we still have pockets of underperformance within the super sector, and we need to be working to address those,” he said.
In particular, Mr Coates said the report added little to the debate around legislated increases to the super guarantee – currently slated to lift from the current 9.5 per cent to 12 per cent by 2025.
Other challenges not addressed by the report include problems posed by employers underpaying super contributions, issues with the pension asset test, or the growing number of Australians retiring with debt.
“A high-level look at the industry’s aggregate performance covers up the products that aren’t performing,” he told The New Daily.
“Regardless of where we sit in a global context, we need to fix these problems anyway”.
Mr Coates said there was no reason for Australia to rest on its laurels, and that more needs to be done to improve the system where possible to ensure members receive the best possible outcomes for their retirements.
The New Daily is owned by Industry Super Holdings