Heading

2017 Melbourne Launch

Monday 23rd October, 2017
Invest Victoria
Results

 Dr David Knox
Rankings 2017

Denmark
The Netherlands Australia
PENSION SYSTEMS ARE IMPORTANT BUT DIFFERENT

“Pension systems face

RETIREMENT
INCOME
considerable social and
Private DC SYSTEMS economic challenges in
the wake of the economic
crisis and given the ongoing
Insurance Pensions Assets population ageing.”
- OECD
Lump
Public Indexation Employers
sums
Too important
Governance DB Members
to be ignored
THE STARTING POINT
THE FUNDAMENTAL QUESTIONS

ADEQUACY “What do you get?”

SUSTAINABILITY “Can it keep delivering?”

INTEGRITY
“Can it be trusted?”
CHANGES FROM 2016 TO 2017

Three new countries

• Colombia
• New Zealand
• Norway
New Sustainability question
• Real economic growth
• Reduced weighting for assets and contributions
Adequacy sub-index
• Net replacement rate now allows for voluntary schemes
CALCULATING THE MMGPI
ADEQUACY

ADEQUACY 1 France 80.4

• Minimum (or base) pension 2 Netherlands 78.0

• Net replacement rate
• Benefit design
3 Ireland 77.9
• Non-super savings
• Level of “growth” assets
… India, Mexico, South Africa
SUSTAINABILITY

SUSTAINABILITY
1 Denmark 79.8

•
•
Coverage of private pension plans
Level of pension assets as % of GDP
2 Netherlands 73.5

• Demographic issues
• Mandatory contributions with
funding
3 Australia 73.0
• Labour force participation rate
• Net government debt … Japan, Austria, Italy
• Real economic growth
INTEGRITY

INTEGRITY
1 Finland 91.0

2 Norway 90.3
• Regulation of private pension plans
• Governance requirements – national
and pension plans 3 Netherlands 87.5
• Protection of members’ benefits
• Communication to members
• Costs of the system … China, Argentina, Mexico
OVERALL 2017 RESULTS
THE GLOBAL VIEW
AUSTRALIA’S RESULTS

Overall index value: 77.9 to 77.1

• Reduction in net household saving rate
• Impact of new sustainability weightings

Recommendations
• Introduce requirement for an income stream
• Continue to raise labour force participation rates at
older ages
• Adjust age pension eligibility age with life expectancy
• Increase preservation age gradually
GLOBAL CHALLENGES

• Increase relevant retirement/pension ages

• Promote higher labour force participation rates at older
ages
• Encourage/require additional savings
• Increase coverage of employees and/or the self-employed
• Reduce leakage from the system before retirement
• Review the indexation of the public pension
• Improve the governance and transparency of private
pensions