Monday 23rd October, 2017 Invest Victoria Heading 2017 Melbourne Launch Monday 23rd October, 2017 Invest Victoria

Results Dr David Knox

Rankings 2017 Denmark The Netherlands Australia

Retirement income systems PENSION SYSTEMS ARE IMPORTANT BUT DIFFERENT Assets Pensions Private Lump sums DB DC Public Insurance Governance Employers Retirement income systems Indexation Members “Pension systems face considerable social and economic challenges in the wake of the economic crisis and given the ongoing population ageing.” - OECD Too important 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

1 2 3 ADEQUACY France 80.4 Netherlands 78.0 Ireland 77.9 Minimum (or base) pension Net replacement rate Benefit design Non-super savings Level of “growth” assets 3 Ireland 77.9 … India, Mexico, South Africa

1 2 3 Denmark 79.8 Netherlands 73.5 Australia 73.0 SUSTAINABILITY Coverage of private pension plans Level of pension assets as % of GDP Demographic issues Mandatory contributions with funding Labour force participation rate Net government debt Real economic growth 3 Australia 73.0 … Japan, Austria, Italy

1 2 3 INTEGRITY Finland 91.0 Norway 90.3 Netherlands 87.5 Regulation of private pension plans Governance requirements – national and pension plans Protection of members’ benefits Communication to members Costs of the system 3 Netherlands 87.5 … 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