Super shouldn't all be lump sum: report

AUSTRALIA has the third-best retirement savings system in the world, but it could be improved by moving to a compulsory income stream element of accessing superannuation, a survey shows.

Australia finished third out of 18 countries graded in the Melbourne Mercer Global Pension Index, behind the Netherlands and Denmark in first place.

Report author David Knox said many of the world's retirement systems were under growing stress with an ageing population and low investment returns.

He said in Australia's case, having a means-tested aged pension meant people were willing to take more risks in their investment portfolios than in countries without that safety net.

Dr Knox said part of people's retirement benefits should be provided as an income stream rather than being seen as a one-off windfall.

"I don't think we have to convert 100 per cent to an accumulated benefit to an income stream, but I think predominantly we need to focus on income," he told the audience at the launch of this year's index in Melbourne.

"We won't get there immediately, but we need to transition towards an income system."

Exposure to growth assets, including equity and property, ranged from almost zero in some countries to more than 70 per cent in Australia.

Australian Super chief executive Ian Silk said while he acknowledged many people were angry about their superannuation funds' returns over the past five years, that did not mean there was a case for dramatically changing the weight of investments in favour of bonds or fixed interest.

"The last five years have been lousy for members of super funds unambiguously and it matched lousy equity markets, which has meant that most members of superannuation funds are angry, disillusioned, disappointed - entirely natural reactions," he said.

Mr Silk said the way to tackle this was for funds to focus on individual fund members' investment horizons rather than moving away from growth assets across the entire system.

Dr Knox said other ways to improve the system in Australia included boosting labour force participation among older workers, introducing a mechanism to increase the pension age as life expectancy grew and gradually boosting the age at which members could access their superannuation.

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