now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Singapore retirement income system leads other Asian countries, study says
Singapore is the only Asian country with a retirement income system on par with leading Western economies, according to the comprehensive 2014 Melbourne Mercer Global Pension Index (MMGPI). Of the six Asian countries featured in the index, Singapore scored 65.9; leading China (49), Indonesia (45.2), Japan (44.4), South Korea (43.6) and India (43.5)
The Asset 14 Oct 2014

Singapore is the only Asian country with a retirement income system on par with leading Western economies, according to the comprehensive 2014 Melbourne Mercer Global Pension Index (MMGPI).

 

Of the six Asian countries featured in the index, Singapore scored 65.9; leading China (49), Indonesia (45.2), Japan (44.4), South Korea (43.6) and India (43.5) but still fell short of the Western countries which made up the rest of the top 10.

 

Denmark continued to hold onto the top position in 2014 with an overall score of 82.4. Its well-funded pension system with its good coverage, high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations are the primary reasons for its top spot.

 

The MMGPI measured 25 retirement income systems against more than 50 indicators under the sub-indices of adequacy, sustainability and integrity and, according to author of the report and senior partner at Mercer, David Knox, the results highlight the incredible complexity of the many different systems adopted around the world.

 

"The scores of countries such as China, Indonesia, India and Korea are reflective of the relatively early stages of development of their retirement income systems, which can make comparison difficult. However, our study conclusively demonstrates some common challenges. For example, many countries have recognized the need to increase the retirement age to reflect 2014 Melbourne Mercer Global Pension Index increasing life expectancy and the need to encourage higher levels of private saving," Knox said.

 

Mercer's study includes specific recommendations for each of the countries listed in the index.

 

However, the MMGPI noted there is no perfect system that can be applied universally around the world, but there are many common features that can be shared for better outcomes for individuals. The MMGPI now covers 25 countries and close to 60% of the world's population. It has grown from 11 countries in 2009 and is the most comprehensive comparison of pension systems globally.

 

Deborah Ralston, executive director of the ACFS said the expansion of the Index reflects the fact most countries are grappling with the social and economic effects of ageing populations and global comparisons can lead to global lessons for government, industry and academia as they debate how best to provide for an ageing population.

 

"Although each country's retirement income system reflects a unique history, there are some common themes as many countries face similar problems in the decades ahead and the Index aims to highlight the best solutions and share them globally," said Ralston.

 

"It's pleasing to note average scores are increasing over time, suggesting pension reform around the world is having a positive effect. The average score for the 14 countries in 2010 was 61.7 compared to 64.3 for the same countries in 2014," she said.

 

Good governance critical for success in changing world

 

Beyond the Index rankings, the 2014 MMGPI looked at the importance of trust and transparency in a retirement income system.

 

"The tides of accountability for ensuring financial security in retirement are shifting from State and employer responsibility to individuals in many countries. This trend will continue as life expectancy continues to increase and many governments reduce the per capita expenditure on their aged population. This shift means communication to members has never been more important or come under more scrutiny from members, regulators, employers, consumer groups, politicians and the media," said David Knox, senior partner at Mercer.

 

"Ensuring transparency and the trust of individuals is becoming increasingly important. If you lose community trust in a pension system; you risk losing the effectiveness of the system.

 

"Governments, regulators and financial industries have to ensure good governance frameworks and practices that promote regular easy to understand communication, clear benefit projections, and access to comparative information in a cost-efficient manner.

 

"The pension industry must develop efficient methods to be transparent in meaningful and relevant ways to all stakeholders. There is now no alternative," he said.

 

Other challenges common to many countries include the need to:

 

· Promote higher labour force participation at older ages

 

· Increasing coverage of the private pension system with an element of compulsion or automatic enrolment

 

· Reduce the leakage from the system prior to retirement

 

· Improve the governance of private pension plans and require improved transparency

 

The index looks objectively at both the publicly funded and private components of a system as well as personal assets and savings outside the pension system. It is published by the Australian Centre for Financial Studies (ACFS) in conjunction with Mercer and is funded by the Victorian State Government.

 

Conversation
Ying Bai
Ying Bai
ESG lead, Greater China
FTSE Russell
- JOINED THE EVENT -
7th Taiwan Investment Summit - Webinar Series 2021
Transitioning to a green future
View Highlights
Conversation
Janet Li
Janet Li
partner and wealth business leader, Asia
Mercer
- JOINED THE EVENT -
Webinar
Developing strategies supporting sustainable investing
View Highlights