Aussie pension ranks third

Australia has ranked third in Mercer's global pension index with a score of 77.9, following Denmark at 80.5 and the Netherlands at 80.1.

However, the country's overall score had dropped 1.7 points since 2015, primarily due to a reduction in the net replacement rate.

The index found Australia's pension adequacy dropped from 81.2 in 2015 to 76 in 2016, its sustainability increased from 72.1 to 74.1, and integrity dropped from 87.6 to 86.1.

Mercer said the score for Australia's system could be increased by:

• 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; and
• 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 Pension eligibility age.

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Despite the high ranking, Australia was not the top country for any indicator with the Netherlands claiming the top spot for adequacy, Denmark for sustainability, and Finland for integrity.