Australia’s retirement system has slid to ninth place this year, down from sixth, as its quality of life and finances scores dropped, a Natixis index has found.
Natixis Investment Manager’s Global Retirement Index 2019 found that while Australia placed fourth overall in the ‘finances in retirement’ sub-index it produced a slightly lower score compared to last year, thus the drop in ranking.
“Compulsory superannuation and the positive outcomes it produces for retirees lies at the heart of the high ranking, but Australia also scored well in the categories of interest rates (sixth) and bank non-performing loans (eighth) – both signs of a robust financial system,” the index said.
The report found the finance score was decreased as a result of lower rankings for old-age dependency, interest rates, tax pressure, and government indebtedness. The only indicator that increased was bank non-performing loans.
The country’s ‘quality of life’ score deteriorated this year after weak performances in the happiness and environmental factors indicators. The country also slipped to sixth-lowest for environmental factors despite ranking first in air quality.
The index assessed 44 countries on factors that drove retirement security. Iceland, Switzerland, and Norway remained the top three for the third year running.
Natixis Investment Managers in Australia chief executive, Damon Hambly, said while the superannuation system was the envy of other countries, most balances were too low given the 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.”
The index also pointed to the fact that the gender gap in retirement could derail women’s retirement security.
Natixis Investment Managers managing director for Australia, Louise Watson, said: “If left unchecked, the different circumstances and barriers women face could potentially derail their retirement security.
“Australian women retire with on average 47% 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.”