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Asia Pacific: 3 markets in region have above average pension systems

Source: Asia Insurance Review | Dec 2018

The pension systems of three markets in the Asia Pacific have been rated as above the average of 34 retirement income systems reviewed by Monash Business School’s Australian Centre for Financial Studies and global human resources consulting firm, Mercer.
Their report, the 2018 Melbourne Mercer Global Pension Index, showed that Australia, New Zealand and Singapore have an overall index value of between 68.5 and 72.6, compared to the average of 60.9 for all 34 systems around the world covered by the study. The ranking of the 10 Asia Pacific pension systems included in the study are:
Ranking of the 10 Asia Pacific pension systems
This study confirms that the Netherlands and Denmark have the best systems with an overall index value of more than 80.
The index uses three sub-indices – adequacy, sustainability and integrity – to measure each retirement income system against more than 40 indicators. The overall index value for each system represents the weighted average of the three sub-indices. 
The index shows that three markets – Australia, China and India – have overall index values this year that are lower than what they chalked up in 2017. 
One reason for this is that questions for the sub-indices were changed this year. The changes mean that:
  • Systems that have a universal pension and no income-related social security (such as Ireland, New Zealand and the UK) and those with means testing of their state pension in this income range (such as Australia) have been adversely affected whilst systems where the net replacement rate is relatively constant across income levels (such as Brazil, Finland, Malaysia, Norway, Poland, Singapore and Sweden) have been positively affected. 
  • The results for markets with the highest level of household debt (when expressed as a percentage of GDP), such as Switzerland, Australia, the Netherlands and Norway, are adversely affected.
The results show that the average score for the overall index has increased by 0.9 percentage point to 60.9 with an increase in all sub-indexes. The main reason for the overall increase was the rise in the sustainability sub-index score which increased materially for several systems due to a range of factors including increased coverage of private pension plans, higher contribution rates and rising labour force participation at older ages. A 
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