By: Chris Kuan
The annual Mercer Global Pension Index recently released showed that Singapore ranked 10th overall (the report provides the index scores by alphabetical order so I had to rank them myself). This looks good. Those ranked higher are the usual suspects: by ranking order Denmark, Netherlands, Australia, Sweden, Switzerland, Finland, Canada, Chile and the UK (Yes, that ‘collapsed state’ as mentioned by one of our Ministers.)
In terms of Sustainability which is 35 percent of the overall index, Singapore is ranked at No. 8 for issues such as contributions, government debt, total assets and coverage with demography likely to hold back the score. This should not surprise because the level of contributions in Singapore is high and the government’s fiscal position is strong.
Although it will be difficult for Mercer to highlight the individual wrinkles, it should be noted that the government’s strong fiscal position is reliant to a significant extent on the drainage of those contributions via the medium of real estate prices. This should be born in mind.
In terms of Integrity which looks at such things as governance, protection and communication, Singapore is ranked 12.
In my opinion, there is a trade off between Adequacy and Sustainability. So it is important where we stand in the trade off. Given the large disparity between the two, quite clearly we have sacrificed Adequacy for Sustainability.
That is to say we have accepted (or are provided with comparatively inadequate payouts) in exchange for making the government finances stronger. After all there is a strong reason why Singapore is rated double Triple A. But as this survey shows and as I have repeatedly pointed out before – the very high credit rating comes at costs to our retirement adequacy and social benefits. Put in local parlance – ‘government rich, people poor’.
But here is the thing though – the trade off could be better for Adequacy without hurting Sustainability. Australia, Netherlands, Denmark, Sweden, Switzerland all scored higher than Singapore both in Adequacy and Sustainability. If we are talking about improving Adequacy by accepting lower Sustainability, Chile whose system is closest to Singapore (without the housing withdrawals), Finland and Canada provided better adequacy with sustainability not much below Singapore’s. Fruit for thought or if you rather, clearing the smoke.