The provision of financial security in retirement is critical for both individuals and societies as most countries are now grappling with the social and economic effects of ageing populations. Yet, a comparison of the diverse retirement income systems around the world is not straightforward. As the OECD (2011) notes: involve a number of different programmes. Classifying pension systems and different retirement-income schemes is consequentially difficult.”
Furthermore, comparing these systems is certain to be controversial as every system has evolved from each country’s particular economic, social, cultural, political and historical circumstances. There is no perfect system that can be applied universally around the world. However there are certain features and characteristics of retirement income systems that are likely to lead to improved benefits for individuals and households, an increased likelihood of future sustainability of the system, and a greater level of confidence and trust within the community.
This study of 16 countries has confirmed that no system is perfect. Indeed, consistent with our previous two reports, no country’s system has received an overall index value above 80, which we consider represents an A-grade retirement income system. However, several countries have an index value between 65 and 80, which represents a B-grade system and — with some adjustments or improvements — these countries could be re-classified as A-grade systems. (Changes that would raise each of these systems to the A-grade level are discussed in the final chapter.) Furthermore Chapter 4 describes the features of an A-grade system and shows that it is possible for developed economies with appropriate policies to reach this highest or gold standard.
We believe that none of the countries in this pilot study has an E-grade system, which would be represented by an index value below 35. A score between 35 and 50, which represents a D-grade system, indicates a system that has some sound features but where there exist major omissions or weaknesses. A D-grade classification may also occur in the relatively early stages of the
development of a particular country’s retirement income system, such as China and India.
This year we have also introduced B+ and C+ grades to highlight that certain countries are approaching A and B grades respectively.
Read the full Executive Summary on page 5 of the Melbourne Mercer Global Pension Index.