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Mercer's retirement and pension index

Singapore is Asia’s number one in pension systems



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Singapore ranked number one amongst Asian countries for a third consecutive year in the Global Pension Index, that was topped globally by Denmark for a fourth consecutive year.

Despite Singapore coming out on top in Asia, a slight drop in the index value of the nation’s retirement savings system saw it slip from a B grade last year to a C+ grade overall.

The 2015 Melbourne Mercer Global Pension Index (MMGPI) attributed the drop in Singapore’s retirement score to three reasons:

  • A change in the calculation of the amount of money set aside for retirement – this change reduced the level of pension assets as a percentage of GDP for Singapore.
  • Most recent data from the Economic Intelligence Unit showed a decrease in the net household savings rate for Singapore.
  • United Nations’ updated life expectancy figures in its World Population Prospects showed a continued decline in mortality rates for Singapore.

Singapore’s overall score decreased from 65.9 in 2014 to 64.7 in 2015, moving it further away from an ‘A’ grade, which is given to pension systems that score above 80.

Denmark and Netherlands are the only countries to achieve an A grade in the history of the index.

“While Singapore’s retirement income system remains amongst the best in Asia, we are not the best globally. Improvement will be influenced by the legislative and regulatory environment,” said Neil Narale, Asia retirement leader for Mercer.

Narale noted that Singapore is on the right track – owing to improvements to CPF announced in 2016, including increasing the wage limit, contributions and guaranteed investment returns for older members and introduction of the Silver Support Scheme to help low income retirees.

Now in its seventh year, the MMGPI is published by the Australian Centre for Financial Studies in conjunction with Mercer and funded by the Victorian State Government.

This year’s study saw Denmark holding on to the global top spot with a score of 81.7.

This was attributed to its well-funded pension system with good coverage, high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations.

ALSO READ: How does Singapore’s CPF rank on the global pension stage?

The report suggested three measures to improve Singapore’s retirement income system:

  • reducing the barriers to establishing tax-approved group corporate retirement plans;
  • opening CPF to non-residents (who comprise more than one-third of the labour force);
  • increasing the labour force participation rate amongst older workers.
Aditi-Nov-2015-mercer-pension-retirement-index-report

 

ALSO READ: “Major weaknesses” found in Asian pension systems

Among other Asian nations, China’s index was pegged at 48, down from 49 in 2015, which the report indicated was “a system that has some desirable features, but also major weaknesses… that need to be addressed.”

Per the report, one way to improve China’s overall index value could be to continue to increase the coverage of workers in pension systems.

Another suggestion in the report was to introduce a requirement that part of the supplementary retirement benefit must be taken as an income stream.

Image: Shutterstock



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