Pension systems around the world, whether they be social security systems or private sector arrangements, are now under more pressure than ever before. Significant pension reform is being considered or implemented in many countries due to:
- their ageing populations arising from lower fertility rates and increasing life expectancies
- increased government debt in some countries
- uncertain economic conditions
- record low interest rates
- a global shift towards greater individual responsbility with defined contribution plans.
Within this global environment of change, it is important that we learn together to understand what best practices may look like, both now and into the future. This seventh edition of the melboune Mercer Global Pension Index presents such research and compares retirement income systems in 25 countires which encompass a diversity of pension policies and practices.
Many of the challenges relating to ageing populations are similar, irrespective of each country’s social, political, historical or economic influences. Further, the policy reforms needed to alleviate these challenges are also similar and relate to pension ages, encouraging people to work longer, the level of funding for retirement, and some benefit design issues that reduce leakage of benefits before retirement.
This year we have looked back over the last seven years to check if pension systems can keep delivering into the future. It is both interesting and insightful as some contries have increased their labour force participation at older ages whereas in other countries this has remained steady. We also witness considerable variation in the movement of the value of pension assets (when expressed as a percentage of GDP) caused by the global financial crisis and the differences in asset allocation.
The primary objective of this research is to benchmark each country’s retirement income system using more than 40 indicators. An important secondary purpose is to highlight the shortcoming in each country’s system and to suggest possible areas of reform that would provide more adequate retirement benefits, increased sustainability over the longer term and/or a greater trust in the pension system.
The Index is produced by the Australian Centre for Financial Studies and partnered with Mercer, with the Index funded by the Victorian State Government.