In a recently-published ranking of retirement income systems around the world, Singapore scored the highest in Asia and ranked ninth overall.
Meanwhile, Japan and Malaysia showed the most improved retirement income systems on the 14th annual Mercer CFA Institute Global Pension Index, which compares 44 retirement income systems across the globe, covering 65 per cent of the world’s population.
Mercer, an American asset management firm, published its latest rankings on Tuesday (Oct 11).
Iceland took the top spot, followed by the Netherlands in second place and Denmark in third. Israel and Finland came in fourth and fifth respectively.
The index studies different retirement income systems around the globe, showing the weaknesses of each, and proposes areas where changes might be made to help give pensioners more sustainable retirement benefits.
Here are Mercer’s recommendations for Singapore:
- Reduce the barriers to establishing tax-approved group corporate retirement plans
- Open up CPF to non-residents (who make up a significant percentage of the labour force)
- Increase the age at which CPF members can access their savings set aside for retirement, as life expectancies rise
- Improve the level of communication provided to CPF members
According to Mercer, “While Singapore saw a slight dip in its overall index value is 2021, it bounced back this year due mainly to the revised scoring matrix and an increase in net replacement rates.”
The firm added that most Asian countries have shown improvements, with the exception of China, Indonesia, and the Philippines.
Malaysia, which is ranked 23rd on the index, showed an improvement because of an increase in net replacement rates, while Japan, ranked 35th on the scale, has improved because of a change in its approach relating to pension plan coverage.
The retirement income systems in Korea, Hong Kong, India, Taiwan, and Thailand have also shown improvements.
However, in spite of the strides taken in Asian retirement systems, its average overall index value is 53.8, which is still significantly lower than the worldwide average of 63.
Nevertheless, the economic impact of the pandemic and the volatility of the geopolitical landscape “has led to the readjustment of priorities for not just Asian markets but the world in general,” notes Asia Wealth Business Leader for Mercer, Ms Janet Li.
“While Asia still lags the global average in the overall index value, we are seeing positive year-on-year improvements for most of the markets. That said, the challenges of longevity will persist indefinitely.
Hence, governments cannot afford to put refining and improving their retirement systems on the back burner, but must prioritize and take action promptly,” she added.
“There is no market in Asia that doesn’t need urgent pension reforms, and policymakers and industry stakeholders need to take collective action to ensure the adequacy of pension balance sheets and the sustainability of retirement benefits,” adds Nick Pollard, Managing Director, Asia Pacific, CFA Institute. /TISG
Report recommends raising CPF withdrawal age; allowing non-permanent residents to participate