Retirement income competency lags in Asian markets

Post-pandemic, retirees face new risks such as inflation and rising interest rates.

Asian countries showed various levels of pension competency, with Singapore topping first whilst the Philippines showed the least competence, according to Mercer’s Global Pension Index 2023.

The Index addresses this complexity, evaluating retirement income systems using three sub-indices: adequacy, sustainability, and integrity, encompassing over 50 indicators.

The overall index value for each system is a weighted average of these sub-indices, with 40% for adequacy, 35% for sustainability, and 25% for integrity. The higher the index score, it is described as “first-class” to having a sound structure”. Whereas those in the lower grades are seen as having “some good features” to “some desirable features”.

Singapore scored the highest with 76.3. It was followed by Hong Kong (64.0), Japan (56.3), Malaysia (56.0), China (55.3), Taiwan (53.6), Indonesia (51.8), South Korea (51.2), Thailand (46.4), India (45.9), and the Philippines (45.2).

These weightings emphasize the importance of adequacy, sustainability, and governance aspects. With the inclusion of Botswana, Croatia, and Kazakhstan in 2023, the study covers 47 retirement income systems, reflecting significant global diversity, with index scores ranging from 42.3 for Argentina to 85.0 for the Netherlands.

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Ensuring financial security in retirement is vital for individuals and societies worldwide due to the challenges posed by ageing populations. As the World Economic Forum highlights, the elderly now outnumber young children for the first time in history.

Post-pandemic, retirees face new risks such as inflation and rising interest rates, which strain government finances and impact public services. 

Geopolitical uncertainties also influence investment returns, as noted by the OECD. This financial and economic instability, coupled with increasing living costs, may delay essential pension system reforms, jeopardizing the well-being of retirees.

Given these uncertainties and long-term issues, comparing global pension systems is crucial for policymakers and the pension industry. 

However, comparing these diverse systems is complex because they are shaped by unique economic, social, cultural, political, and historical factors.