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Asia retirement systems lag global peers, Covid-19 worsens insecurity, Mercer says

Mercer
The report also shows that all Southeast Asian countries’ retirement systems registered lower index value
By Goh Thean Eu   
October 21, 2021

Asia’s retirement systems continue to lag global peers, and the coronavirus crisis has worsened retirement insecurity in a region already grappling with challenges posed by ageing populations and longer life expectancies, according to an annual pension report from US investment consulting firm Mercer.

The Mercer CFA Institute 2021 Global Pension Index gives Asia’s retirement systems an average score of 52.2 this year, compared to the global average of 61.

Scores for all Southeast Asian countries declined, including Singapore and Malaysia, the region’s top ranked retirement systems. Singapore dropped to 70.7 from 71.2 in 2020, and Malaysia fell to 59.6 from 60.1.

“Asia’s retirement systems continue to grapple with challenges of providing adequate retirement income and long-term sustainability, particularly in light of ageing populations, longer life expectancies and declining birth rates,” Mercer’s Asia Wealth Business Leader Janet Li says in a statement on October 19, when the report was published. “The economic impact of the pandemic has exacerbated retirement insecurity with lower pension contributions and higher government debt.”

She urged governments to act immediately on the issues, pointing to China where “concerted effort to implement policy improvements and grow the base of both individual and corporate participants in the pension system is paying off slowly but surely”.

China’s retirement system improved to 55.1 this year from 47.3 in 2020.

According to Mary Leung, CFA Institute’s head of advocacy for Asia Pacific, all markets in Asia need urgent pension reform.

“We have been operating in an extremely challenging environment with historically low interest rates and, in some cases, negative yields clearly impacting returns,” she notes in the statement.

Globally, Iceland was the top scorer with 84.2, followed by Netherlands, 83.5. and Denmark, 82. Australia has the best pension system in Asia with a score of 75.