The Mercer CFA Institute Global Pension Index 2022 surveyed more than 40 retirement income markets, with Australia's superannuation system placing sixth for the second consecutive year. The Asia Pacific market with the top ranking is Australia.
Singapore (9th) and New Zealand (15th) are the next two countries behind Australia on the Index, which this year ranks the pension systems of 44 nations. Thailand (44th) and the Philippines (43rd) round up the bottom three.
For the second year in a row, Iceland (84.7 overall index value) leads the list globally, followed by the Netherlands (84.6) and Denmark (82.0), in that order.
The total index value for Australia increased from 75.0 in 2021 to 76.8 in 2022. While Singapore (74.1)'s overall index value decreased slightly in 2021, it recovered this year mostly as a result of the updated scoring matrix and higher net replacement rates. With the exception of the Philippines (54.5), Indonesia (49.2), and mainland China (54.5), most Asian countries' retirement income programs witnessed improvements overall (42.0).
Best regional improvement
The two Asian countries with the most improved systems from 2021 were Malaysia (63,1) and Japan (54,5). In addition to the updated scoring methodology, Malaysia's improvement was also primarily the result of increased net replacement rates, whereas Japan had an updated strategy for pension plan coverage.
Despite having the lowest index value globally (41.7), Thailand is making steady development, according to the research.
The 13 markets in the Asia Pacific area are ranked and scored in the following table:
Market | Rank
| Overall Index Value | Adequacy | Sustainability | Integrity | |||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |
Australia | 6 | 6 | 76.8 | 75.0 | 70.2 | 67.4 | 77.2 | 75.7 | 86.8 | 86.3 |
China | 36 | 28 | 54.5 | 55.1 | 64.4 | 62.6 | 39.3 | 43.5 | 60.0 | 59.4 |
HK | 19 | 18 | 64.7 | 61.8 | 61.5 | 55.1 | 52.1 | 51.1 | 87.6 | 87.7 |
India | 41 | 40 | 44.4 | 43.3 | 37.6 | 33.5 | 40.7 | 41.8 | 60.4 | 61.0 |
Indonesia | 39 | 35 | 49.2 | 50.4 | 39.3 | 44.7 | 44.5 | 43.6 | 71.5 | 69.2 |
Japan | 35 | 36 | 54.5 | 49.8 | 58.0 | 52.9 | 44.5 | 37.5 | 63.0 | 61.9 |
Malaysia | 23 | 23 | 63.1 | 59.6 | 57.2 | 50.6 | 60.2 | 57.5 | 76.9 | 76.8 |
NZ | 15 | 15 | 68.8 | 67.4 | 64.0 | 61.8 | 64.7 | 62.5 | 82.1 | 83.2 |
Philippines | 43 | 41 | 42.0 | 42.7 | 40.5 | 38.9 | 52.3 | 52.5 | 30.0 | 35.0 |
Singapore | 9 | 10 | 74.1 | 70.7 | 77.3 | 73.5 | 65.4 | 58.8 | 81.0 | 81.5 |
S Korea | 38 | 38 | 51.1 | 48.3 | 40.1 | 43.4 | 54.9 | 52.7 | 63.5 | 50.0 |
Taiwan | 37 | 34 | 52.9 | 52.8 | 42.0 | 40.8 | 53.2 | 51.9 | 69.8 | 69.3 |
Thailand | 44 | 43 | 41.7 | 40.6 | 41.3 | 35.2 | 36.4 | 40.0 | 50.0 | 50.0 |
Average score | 63.0 | 61.0 | 65.2 | 62.2 | 53.5 | 51.7 | 72.8 | 72.1 | ||
Total no. | 44 | 43 |
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Source: Mercer CFA Institute Global Pension Index 2022 | Key: |
| highest score in region | |||||||
The Index compares various retirement income systems, emphasizing some of their flaws and outlining potential areas for reform that could help to deliver more adequate and long-lasting retirement benefits.
Portugal has been added to the 2022 Index, bringing the total number of retirement income systems included by the Index to 44, or 65% of the world's population.
The sustainability, adequacy, and integrity of each retirement system are measured by the Index using its three sub-indices. To strengthen its integrity and eliminate any potential unintentional biases, the scoring criteria were thoroughly reviewed this year. These model modifications had a net effect of raising the average Index value by 1.09 points. Each system's effect on individual values naturally differed, with the majority of changes occurring between minus one and plus two.
Challenges
The economic effects of the (COVID-19) epidemic and an uncertain geopolitical environment have forced a reevaluation of objectives for not only Asian markets but the entire world, according to Ms. Janet Li, Asia Wealth Business Leader at Mercer. Even if Asia's overall index value currently lags behind the average for the world, most of the markets are showing positive year-over-year growth. Nevertheless, the difficulties associated with longevity will always exist. Governments must prioritize and act quickly rather than affording to put the improvement of their retirement systems on the back burner.
"A challenging near-term outlook, largely driven by sharply higher prices, rising interest rates, currency depreciation, and capital outflows, is hitting Asia's development at a time when many of the markets here, especially developing markets, are trying to reverse the impact of the pandemic," said Mr. Nick Pollard, managing director, Asia Pacific, CFA Institute. In the long run, there is a chance that these trends may continue and establish a new normal for Asia and the rest of the world. Therefore, no market in Asia is exempt from the need for urgent pension changes, and industry stakeholders and policymakers must work together to assure the sufficiency of pension balance sheets and the sustainability of retirement benefits.
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