Australia’s retirement savings system really stacks up

Research shows Australia's three-pillar system is highly regarded world-wide.

Australia’s retirement savings system stacks up pretty well when compared with other pension systems across the globe1 and it seems Australians are pretty happy with our super system too2.

Our pension system is just one of many that have evolved as countries step up to the challenges of providing appropriate standards of retirement living to ageing populations. Some systems have relied on government support; others have left more up to the individual or private sector.

Australia’s three-pillar system – while not without scope for improvement – is considered comparatively effective. It consists of the government-funded, means-tested Age Pension, compulsory superannuation and voluntary private savings (including voluntary superannuation contributions encouraged through taxation concessions).

Other countries have different mixes: 18 OECD (Organisation for Economic and Development) countries have mandatory or quasi-mandatory pension systems, while eight have voluntary schemes. New Zealand has a universal system that covers its entire population, regardless of income or previous working history. Hong Kong’s pension assets are managed by the private sector, while Singapore’s are managed by the state.

Some countries have defined benefit schemes, where pensioners are guaranteed a certain amount for their retirement. Others, like Australia, have mainly defined contribution schemes, where pension benefits and payments are determined by how much was placed in super, and investment returns over the years.

All this makes it difficult to ensure we are comparing apples with apples across global pension systems, which collectively have assets of more than US$25 trillion. However, a number of studies and reports offer some insights into how Australia compares internationally.

Research shows Australia is highly regarded world-wide

With total superannuation assets at $2.1 trillion at the end of the September 2016 quarter3, Australia’s system is the fourth largest in the world. It rebounded strongly after its slump to $1.1 trillion in the immediate aftermath of the global financial crisis.

Deloitte’s Dynamics of the Australian Superannuation System report4 forecasts that the pool will grow strongly – to $4 trillion over the next 10 years and to $7.6 trillion by 2033 – on the back of rises in population, investment returns and the Superannuation Guarantee (increasing to 12% from July 2025). In real terms, this projection implies that superannuation assets will rise from less than 100% to approximately 180% of gross domestic product (GDP) over the next 20 years.

When it comes to the ratio of assets to GDP, Australia was ranked fifth in the OECD in 2012 by a Deloitte Access Economics report, financial performance of Australia's superannuation products5. This report focused on mandatory employment-based retirement income savings in 12 countries.

It described Australia’s system as relatively large and mature, adding: “It is defined contribution, privately managed, and allows competition and choice. Overall, the system is highly regarded world-wide for these characteristics. They have ensured the overall sustainability of the system.”

Make the most of it

We’re in a good retirement savings system so you should make the most of it. Australia offers a range of cost-effective super solutions where providers continuously look for new ways to help make super easy for you to manage.

Superannuation is the largest single investment for many Australians after buying their own home. To help reach your retirement goals, now could be the time to really understand your super and take more control of your finances. And with a number of changes to super now superannuation law, find out what you should be aware of and what it could mean for your future goals.

We’re here to help

There are other ways to give your super a boost, such as making after-tax contributions, to ensure you can retire the way that you want. To see how this works compared to pre-tax contributions, check out our salary sacrifice calculator.

Or if you need help with strategies around your super and more, talk to your financial adviser. If you don’t have a financial adviser, you can find an adviser in your local area or call us on 131 267 Monday to Friday from 8:30am to 7pm (Sydney time).

Ways to contribute to your super

Contributions are an important way to achieve the lifestyle you want in retirement. Check out some of the ways you can get started.

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^ Favourite for super – largest market share by assets under management at aggregate level for retail super. Plan for Life, Marketer View – Retail managed funds, June 2017.