Australia & OECD

Australia & OECD

A] Prelude

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B] The Issue

Australia’s superannuation system regularly earns international praise for its scale and sustainability. But a survey of recent pension reforms across OECD countries suggests the policy agenda is far from settled. From rising retirement ages to mandated decumulation products, the changes taking place in peer economies offer a preview of debates likely to intensify locally.

C] The Details

Rising retirement ages are the norm: The most consistent reform trend across the OECD is the extension of working lives. According to the OECD’s Pensions at a Glance 2025, the average normal retirement age will increase from 64.7 years for men retiring in 2024 to 66.4 years for those starting their careers now. For women, the equivalent figures are 63.9 rising to 65.9 years.

More than half of OECD countries have legislated increases, with future retirement ages reaching 70 or beyond in Denmark, Estonia, Italy, the Netherlands and Sweden. Czechia and Slovenia have both raised their statutory retirement age from 65 to 67, while the Slovak Republic has linked early-retirement conditions directly to life expectancy gains.

Australia’s Age Pension age of 67 is broadly in line with this trend, but the superannuation preservation age, which is the earliest point at which Australians can access their retirement savings, currently sits at 60. That seven-year gap between super access and Age Pension eligibility is wider than in most comparable systems, creating what Treasury’s December 2023 discussion paper on the retirement phase of superannuation described as a complex transition period where retirees manage multiple income sources.

The OECD data also shows that countries with higher normal retirement ages tend to have higher employment rates among older workers. Denmark, Iceland, the Netherlands and Norway, all with retirement ages of 67, have among the highest employment rates for those aged 60 to 64.

D] Contribution rates are climbing

Several OECD countries have recently raised mandatory contribution rates to shore up pension adequacy and system sustainability. Ireland and Korea have both increased contribution rates, Japan has raised its contribution ceiling, and the average effective contribution rate across the OECD stood at 18.8 per cent in 2024.

Australia’s Superannuation Guarantee reached 11.5 per cent in July 2024 and will rise to 12 per cent from July 2025. While this represents a significant increase from the original three per cent in 1992, it remains below the OECD average and well below systems like Italy (33 per cent), Czechia (31.3 per cent) and France (27.8 per cent).

Experts have debated for years whether 12 per cent is sufficient. The Super Members Council projects that Australia’s aggregate superannuation assets will make it the second-largest pension pool globally by 2031, and that Age Pension expenditure as a share of GDP will decline from 2.5 per cent in 2025 to 2.0 per cent by 2060, suggesting the current trajectory is working from a fiscal sustainability perspective, even if adequacy debates continue.

E] Finally

The best way to make sure that the retirement income as of retirement age is increased to a normal solid level, is indeed to introduce mandatory occupational pension plan participation. 

Including a substantial amount of premium and with tax benefits for (voluntary extra) premium payments. 

(Source: PensionPolicyInternational/EPH)