Singapore has one of the 10 best retirement schemes globally, and is the best in Asia: Mercer

Singapore achieved the highest adequacy index – which measures benefits, savings and tax support among other things – in Asia at 73.8.
The Straits Times

Worried about retirement? Well, say no more.

Singapore has the number one retirement system in Asia, and ranks seventh out of 37  systems globally, according to the 2019 Melbourne Mercer Global Pension Index (MMGPI).

Singapore was also the only Asian country to receive a B grade and achieved 70.8 in overall index value, slightly higher than last year’s 70.4 score.

Assessing retirement systems across the sub-indices of adequacy, sustainability and integrity, MMGPI compares retirement systems across the globe and covers almost two-thirds of the world’s population.

Janet Li, Mercer’s business leader for Asia, said in a statement that Singapore “exceeds the global average comfortably across all sub-indices”.

“Singapore is particularly strong in the integrity sub-index, scoring an A grade and value of 81.4 against the global average of 69.7,” she said.

The Republic was also top in Asia (and sixth globally) on the adequacy sub-index – which measures benefits, savings and tax support among other things – with a score of 73.8. China was second in Asia with a score of 60.5.

However, “there’s work to be done to strengthen the system for the long term, particularly in the face of a significant demographic shift which will see almost half of the population being aged 65 or older by 2050,” Li added

Globally, the Netherlands had the highest overall index value of 81.0 and was graded A along with runner-up Denmark. The Netherlands has also consistently held first or second place in 10 of the past 11 MMGPI reports.

The lowest sub-index scores went to Thailand for adequacy (35.8), Italy for sustainability (19.0) and Philippines for integrity (34.7).
Melbourne Mercer Global Pension Index

More improvements needed in Asia, including raising minimum age to access retirement savings

In Asia, Singapore was followed by Hong Kong SAR (14th globally) and Malaysia (16th globally), which both received improved ratings of C+ from C- previously.

Apart from Hong Kong and Malaysia, Indonesia also achieved a C-grade (52.2).

The six systems graded D in Asia were China (48.7), India (45.8), Japan (48.3), Korea (49.8), as well as newcomers Philippines (43.7) and Thailand (39.4), which was also in last place globally.

When compared by region, Asia fell 10 points short of the global adequacy average of 50.3, and was also nine points below the global integrity average. The region was also 2.3 points below the global sustainability average of 50.4.

According to Li, the region’s governments should continue to focus on “adequacy and integrity where we are falling short of the global average”, although retirement systems have shown improvement.

“We need to consider sustaining inter-generational retirement systems which do not put undue burden onto future generations,” she said.

While there are no one size fits all solutions to retirement systems, Li said that there are some common recommendations that the region’s governments should consider.

This includes “increasing the minimum level of support for our poorest aged individuals” to ensure that a portion of retirement benefits are taken as an income stream and raising the age at which older people can access their retirement savings, she added.

The “wealth effect” is causing more individuals to amass debt

This year’s MMGPI also studied the relation of pension assets to a phenomenon known as the “wealth effect” – the tendency for spending to increase with rising wealth.

According to MMGPI, there was also a strong correlation observed between the levels of pension assets and net household debt. As pension assets increase, individuals feel wealthier and are therefore more likely to borrow more, it said.

“The evidence suggests that on a global basis, for every extra dollar a person has in pension assets, their net household debt rises by just under 50 cents,” Dr. David Knox, author of the study, noted.

“It’s imperative that policy makers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future,” he said.

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