Singapore’s retirement system retains its top spot in Asia, ranking seventh out of 39 retirement systems,
according to the 12th annual Mercer CFA Institute Global Pension Index, a study of retirement income
systems across the globe, covering almost two-thirds of the world’s population. The 2020 Global Pension
Index includes two new systems – Belgium and Israel.
South Korea improved from its previous “D” grade to a “C” (50.5). In Asia, “D” grade systems were China
(47.3), India (45.7), Japan (48.5), Philippines (43) and Thailand (40.8), with Thailand having the lowest
index value of all 39 systems. Indonesia achieved a “C” grade (51.4), Hong Kong SAR and Malaysia were
graded “C+” (61.1 and 60.1 respectively), and Singapore achieved a “B” grade (71.2).
Using the weighted average of the sub-indices of adequacy, sustainability and integrity, the Index
measures each retirement system against more than 50 indicators. Against a global average of 59.7, Asia’s overall index value average was 52.
Asia’s average adequacy value was more than 10 points short of the global adequacy average at 49.7, and the region’s integrity average fell nine points below the global integrity average.
Systems around the world struggled with sustainability, with Asia’s average falling just 2.3 points shy of the global sustainability average of 50. Globally, the Netherlands had the highest index value (82.6) and has retained its top position in the overall rankings, notwithstanding the significant pension reforms occurring in that country.
For each sub-index, the highest scores were: the Netherlands for adequacy (81.5); Denmark for
sustainability (82.6); and, Finland for integrity (93.5). The lowest scores were: Mexico for adequacy (36.5);
Italy for sustainability (18.8); and, the Philippines for integrity (34.8).
The widespread economic impact of COVID-19 is heightening the financial pressures which retirees face,
both now and in the future the future. Coupled with increasing life expectancies and the rising pressure on
public resources to support the health and welfare of ageing populations, COVID-19 is exacerbating
Measuring the likelihood that a current system will be able to provide benefits into the future, the
sustainability sub-index continues to highlight weaknesses in many systems. The average sustainability
score dropped by 1.2 in 2020 due to the negative economic growth experienced in most economies due
The impact of COVID-19 is much broader than solely the health implications; there are long term economic effects impacting industries, interest rates, investment returns and community confidence in the future. As a result, the provision of adequate and sustainable retirement incomes over the longer term has also changed.
The level of government debt has increased in many countries following COVID-19. This increased debt
is likely to restrict the ability of future governments to support their older populations, either through
pensions or through the provision of other services such as health or aged care.
Professor Deep Kapur, Director of the Monash Centre for Financial Studies (MCFS), said that many governments around the world have responded to COVID-19 with substantial fiscal stimulus, and central banks have adopted unconventional monetary policy.
For example, in Malaysia, employee contributions to the Employees’ Provident Fund have been cut from
11% to 7% of salaries, creating an expected shortfall of about US$9.4 billion. Likewise in Thailand, social security contribution rates were temporarily reduced from 5% to 2% for both employees and employers from September through November.
Written and published by Monash Centre for Financial Studies (MCFS) & CFA Institute