Singapore, October 19, 2021 – The 13th annual Mercer CFA Institute Global Pension Index (MCGPI) [1] which includes four new systems (Iceland, Taiwan, UAE and Uruguay) this year, saw Singapore’s retirement system retain its top spot in Asia, ranking 10th out of the 43 retirement systems reviewed. Following Singapore, Hong Kong SAR and Malaysia remained the region’s leaders ranking at 18th and 23rd respectively.
The Singaporean index value decreased slightly from 71.2 in 2020 to 70.7 in 2021, due principally to the economic effects of the COVID pandemic. For each sub-index, Singapore’s highest scores were for integrity (81.5), followed by adequacy (73.5), and sustainability (59.8). The average overall index value is 61.0 with sub-index values sitting at 72.1 for integrity, 62.2 for adequacy and 51.7 for sustainability.
The country is ranked 11th for adequacy which looks at benefits, system design, levels of savings, and home ownership among others to determine its ability to provide adequate retirement income; 12th for integrity which considers factors such as regulation, governance, communication and operating costs; and 13th for sustainability which measures the likelihood a system will be able to provide benefits into the future.
Singapore has also retained its B-grade, indicating a pension system with a sound structure, with many good features, but with areas for improvement before reaching the coveted A-grade status. Singapore received the same grade as a number of other developed countries such as Canada, New Zealand and Switzerland.
Chong Chee Loong, Wealth Business Leader, Mercer, Singapore said, “The Singapore pension system is one of the oldest and most developed national schemes in Asia and it’s great to see the system topping the Asian rankings once again, signifying a leading pension arrangement in the region with strong integrity.
The overall index value for the Singaporean system could be enhanced by reducing the barriers to establishing tax-approved group corporate retirement plans, and opening the Central Provident Fund (CPF) to more non-Singaporean employees who currently make up a significant percentage of the labour force. This can be further complemented by increasing the age CPF members can access their retirement savings as well as enhancing communication on CPF to Singaporeans.”
Mary Leung, CFA, Head, Advocacy, Asia Pacific, at CFA Institute, said, “While Asia has fared relatively well compared with most other regions during COVID-19, there is no market in Asia that doesn’t need urgent pension reforms. We have been operating in an extremely challenging environment with historically low interest rates and, in some cases, negative yields clearly impacting returns. Policymakers and industry stakeholders must take collective action to ensure the adequacy and sustainability of retirement benefits.”
Globally, Iceland’s retirement income system (84.2) has been named the world’s best in its debut, closely followed by the Netherlands (83.5) and Denmark (82). For each sub-index, the systems with the highest values were Iceland for adequacy (82.7), Iceland for sustainability (84.6) and Finland for integrity (93.1). The systems with the lowest values across the sub-indices were India for adequacy (33.5), Italy for sustainability (21.3) and the Philippines for integrity (35.0).
Gender differences in pension outcomes
This year’s study also underscored the need for urgent reform to reduce the gender pension gap – an issue inherent in every system.
Across the Organisation for Economic Co-operation and Development (OECD) member countries, the gender pension gap – or difference in retirement income that men and women receive – averages 26%, with the gap ranging from 3% in Estonia to 50% in Japan[2]. The MCGPI’s analysis highlighted that the causes of the gender pension gap are multifold with employment-related, pension design and socio-cultural issues contributing to women being disadvantaged as compared to men when it comes to retirement income.
In its 2021 Global Gender Gap report, the World Economic Forum ranked Singapore 54th among 156 countries for the second consecutive year, with 72.6% of its overall gender gap closed to date. However, only 69.7% of women in Singapore are in the job market, compared to 84.2% for men. On top of that, progress still needs to be made with 70.8% of the income gap closed so far. The share of women in senior roles is also at 36.4%, which shows that access to high levels of decision making and good employment opportunities are still limited for women in Singapore.
While employment issues are major contributors and are well known – more female part-time workers, periods out of the workforce for caring responsibilities and lower average salaries, for example – the 2021 Global Pension Index found that globally, pension design flaws were aggravating the issue. This includes accrual of pension benefits during parental leave not being mandatory, absence of pension credits while caring for young children or elderly parents in most systems, and the lack of indexation of pensions during retirement, all factors which have a larger impact on women due to longer life expectancy.
Janet Li, Mercer’s Wealth Business Leader for Asia, said, “Closing the gender pension gap needs to be a multi-stakeholder undertaking, from employers playing an active role to ensure gender equity in pay, to individuals taking initiatives improving their financial literacy. Our study shows that failure to address the gender retirement savings gap will have long-term costs for businesses, particularly in their ability to attract and retain talent, as well as for society. We need to act now and urgently.
“The pension industry can take the lead by removing eligibility restrictions for individuals to join employment-related pension arrangements. This could be expanded to include part-time or informal workers who represent a large population of working women in Asia. Credits for those caring for the young and the old could also be introduced to ensure that individuals who have had to take time out of the formal workforce due to caregiving responsibilities are not left behind.”
[1] The MCGPI is a comprehensive study of global pension systems, accounting for two-thirds (65 per cent) of the world’s population. It benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits
[2] Towards Improved Retirement Savings Outcomes for Women, March 2021, OECD
System |
Overall index value |
Sub-index values |
||
Adequacy |
Sustainability |
Integrity |
||
Argentina (42) |
41.5 |
52.7 |
27.7 |
43.0 |
Australia (6) |
75.0 |
67.4 |
75.7 |
86.3 |
Austria (33) |
53.0 |
65.3 |
23.5 |
74.5 |
Belgium (17) |
64.5 |
74.9 |
36.3 |
87.4 |
Brazil (30) |
54.7 |
71.2 |
24.1 |
71.2 |
Canada (12) |
69.8 |
69.0 |
65.7 |
76.7 |
Chile (16) |
67.0 |
57.6 |
68.8 |
79.3 |
China (28) |
55.1 |
62.6 |
43.5 |
59.4 |
Colombia (25) |
58.4 |
62.0 |
46.2 |
69.8 |
Denmark (3) |
82.0 |
81.1 |
83.5 |
81.4 |
Finland (7) |
73.3 |
71.4 |
61.5 |
93.1 |
France (21) |
60.5 |
79.1 |
41.8 |
56.8 |
Germany (14) |
67.9 |
79.3 |
45.4 |
81.2 |
Hong Kong SAR (18) |
61.8 |
55.1 |
51.1 |
87.7 |
Iceland (1) |
84.2 |
82.7 |
84.6 |
86.0 |
India (40) |
43.3 |
33.5 |
41.8 |
61.0 |
Indonesia (35) |
50.4 |
44.7 |
43.6 |
69.2 |
Ireland (13) |
68.3 |
78.0 |
47.4 |
82.1 |
Israel (4) |
77.1 |
73.6 |
76.1 |
83.9 |
Italy (32) |
53.4 |
68.2 |
21.3 |
74.9 |
Japan (36) |
49.8 |
52.9 |
37.5 |
61.9 |
Korea (38) |
48.3 |
43.4 |
52.7 |
50.0 |
Malaysia (23) |
59.6 |
50.6 |
57.5 |
76.8 |
Mexico (37) |
49.0 |
47.3 |
54.7 |
43.8 |
Netherlands (2) |
83.5 |
82.3 |
81.6 |
87.9 |
New Zealand (15) |
67.4 |
61.8 |
62.5 |
83.2 |
Norway (5) |
75.2 |
81.2 |
57.4 |
90.2 |
Peru (29) |
55.0 |
58.8 |
44.2 |
64.1 |
Philippines (41) |
42.7 |
38.9 |
52.5 |
35.0 |
Poland (27) |
55.2 |
60.9 |
41.3 |
65.6 |
Saudi Arabia (26) |
58.1 |
61.7 |
50.9 |
62.5 |
Singapore (10) |
70.7 |
73.5 |
59.8 |
81.5 |
South Africa (31) |
53.6 |
44.3 |
46.5 |
78.5 |
Spain (24) |
58.6 |
72.9 |
28.1 |
78.3 |
Sweden (8) |
72.9 |
67.8 |
73.7 |
80.0 |
Switzerland (11) |
70.0 |
65.4 |
67.2 |
81.3 |
Taiwan (34) |
51.8 |
40.8 |
51.9 |
69.3 |
Thailand (43) |
40.6 |
35.2 |
40.0 |
50.0 |
Turkey (39) |
45.8 |
47.7 |
28.6 |
66.7 |
UAE (22) |
59.6 |
59.7 |
50.2 |
72.6 |
UK (9) |
71.6 |
73.9 |
59.8 |
84.4 |
Uruguay (20) |
60.7 |
62.1 |
49.2 |
74.4 |
USA (19) |
61.4 |
60.9 |
63.6 |
59.2 |
Average |
61.0 |
62.2 |
51.7 |
72.1 |
The Global Pension Index benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.
The Global Pension Index is a collaborative research project sponsored by CFA Institute, the global association of investment professionals, in collaboration with the Monash Centre for Financial Studies (MCFS), part of Monash Business School at Monash University, and Mercer, a global leader in redefining the world of work and reshaping retirement and investment outcomes.
This year, the Global Pension Index compares 43 retirement income systems across the globe and covers two-thirds (65 per cent) of the world’s population. The 2021 Global Pension Index includes four new systems – Iceland, Taiwan, UAE and Uruguay.
The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against more than 50 indicators.
For more information about the Mercer CFA Institute Global Pension Index, click here.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 78,000 colleagues and annual revenue of over $18 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 175,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide and there are 160 local societies. For more information, visit www.cfainstitute.org or follow us on Linkedin and Twitter at @CFAInstitute.
A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption.
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