The results of a new survey confirm what we already know – Australia is the lucky country. According to the 2011 Melbourne Mercer Global Pension Index, the Australian retirement system ranks behind Netherlands as the best place in the world to retire.
The annual rankings are based on three factors: The adequacy of the retirement income system to replace pre-retirement income, the sustainability of that system, and the integrity of the system.
As you know Australia’s retirement income system comprises a means-tested age pension (paid from general government revenue); a mandatory employer contribution paid into private sector arrangements (mainly DC plans); and additional voluntary contributions from employers or employees paid into these private sector plans.
Here’s how the report ranked us against 15 other countries:
Australia Score Ranking
Overall Index 75.0 2nd
Adequacy 73.6 4th
Sustainability 71.4 2nd
Integrity 82.4 4th
So how can we, as a nation, improve the sustainability of our retirement system?
Through raising the level of mandatory contributions to improve the level of benefits, by introducing a requirement that part of the retirement benefit must be taken as an income stream, by increasing the labour force participation rate amongst older workers, by introducing a mechanism to increase the pension age as life expectancy continues to increase and by reducing the costs of the system by encouraging greater efficiency.
But what can you do about these results?
My suggestions should sound familiar to readers of my blog.
While our system is great compared to most of the world, if you want financial independence then you can’t depend on “the system.” Instead, develop financial fluency and take control of your future by building a substantial property portfolio that will one day replace your personal exertion income.
Of course this survey only looked at the financial elements of retirement. There are so many more reasons that Australia’s the best place to call home including a strong economy, a stable political environment and despite a rise in crime and violence, the realtive safety we enjoy living in the luckiest country in the world.
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