Australians make up barely 0.3 per cent of the world's population and yet hold $2.1 trillion in pension savings -- the world's fourth-largest such pool. Those assets are viewed as a measure of the country's wealth and economic resilience, and seem to guarantee a high standard of living for Australians well into the future.

Other developed nations, aging even faster than Australia and subject to fraying safety nets, have held up the system as a world-class model to fund retirement. In fact, its future looks nowhere near so bright.

Australia's superannuation scheme is a defined contribution pension plan funded by mandatory employer contributions (currently 9.5 per cent, scheduled to rise gradually to 12 per cent by 2025). Employees can supplement those savings and are encouraged to do so with tax breaks, pension fund earnings and generous benefits.

The gaudy size of the investment pool, however, masks serious vulnerabilities. First, the focus on assets ignores liabilities, especially Australia's $1.8 trillion in household debt as well as total non-financial debt of around $3.5 trillion. It also overlooks the nation's foreign debt, which has reached over 50 per cent of GDP -- the result of the substantial capital imports needed to finance current account deficits that have persisted despite the recent commodity boom, strong terms of trade and record exports.