India, Philippines pension systems lack adequacy: Mercer

A score below 35 would indicate serious deficiencies.

Asia Pacific’s (APAC) retirees face growing risks as inflation rises and interest rates increase, leading to higher costs of government debt and potential challenges in maintaining current public services. 

The Mercer CFA Institute Global Pension Index evaluates 48 retirement income systems, representing 65% of the global population. It uses three sub-indices—adequacy, sustainability, and integrity—to assess each system. 

The overall index is based on a weighted average: adequacy at 40%, sustainability at 35%, and integrity at 25%. 

The 14 APAC economies showed a score above 35, a threshold where a score lower would indicate serious deficiencies. Systems scoring between 35 and 50, classified as D-grade, show some positive aspects but also major weaknesses, often reflecting early stages of development.

Singapore highest in the region with 78.7. This means its pension system “has a sound structure, with many good features but has some areas for improvement that differentiate it from an A-grade system”.

This was followed by New Zealand (68.7) and Hong Kong (63.9). Meanwhile, India and the Philippines scored lowest with 44.0 and 45.8, respectively.

The OECD warns that financial uncertainty and the rising cost of living could cause policymakers to delay necessary reforms to pension systems, which would jeopardize the well-being of both current and future pensioners.

The Netherlands, Iceland, Denmark, and Israel ranked highest overall, all receiving an A grade. Despite ongoing reforms in the Netherlands, the system remains robust, supported by a strong asset base and sound regulation.