A warning from global consulting firm Mercer.
Its 12th annual Mercer CFA Institute Global Pension Index has ranked Australia among the world’s top retirement systems despite concerns that the Federal Government’s early superannuation access scheme has ‘devalued’ the system.
The Index compared the retirement systems of 39 countries around the world with Australia beaten to the podium by the Netherlands, Denmark and Israel respectively.
But lead author Mercer Senior Partner Dr David Knox said the full impact of the pandemic might not be felt on Australia’s superannuation system and Government spending for years to come.
Growing Government debt to start to bite
“Of course, in Australia and other countries, we’ve had the early release of some benefits, so if you’re taking money out now, it’s clearly not there for retirement,” he said.
“But the other impact that’s long term is we’ve seen global government debt increasing – for good reason, to support industries and individuals – but that will place pressure on government budgets in the years to come.”
“That may mean the available funds for spending on the aged – whether it be the aged pension, or health, or aged care – may be affected in five to 10 years’ time.”
Long-term financing options yet to be resolved
This is a serious worry.
The Royal Commission has hinted that it will lay out a long-term plan to transform the aged care sector over the same timeframe – and that will require funding from both taxpayers and older Australians themselves.
The final hearing being held this week will not address the issue of long-term financing because the Royal Commission is still consulting on the various options.
It is clear however that the Commissioners’ recommendations will have to account for the long-term pain inflicted by COVID.