Malaysia’s pension index rose 0.8 higher, maintains C rating
KUCHING: The latest Melbourne Mercer Global Pension Index (Global Pension Index) has revealed that while Malaysia’s index rose 0.8 higher compared to the previous year, the country maintained a C rating.
Now in its tenth year, the Global Pension Index reveals who is the most and who is the least prepared to meet this challenge.
Measuring 34 pension systems, the Index showed that the Netherlands and Denmark -- with scores of 80.3 and 80.2 respectively – both offer A- Grade world class retirement income systems with good benefits – clearly demonstrating their preparedness for tomorrow’s ageing world.
However, common across all results was the growing tension between adequacy and sustainability. This was particularly evident when examining Europe’s results.
Denmark, Netherlands and Sweden score A or B grades for both adequacy and sustainability, whereas Austria, Italy and Spain score a B grade for adequacy but an E grade for sustainability thereby pointing to important areas needing reform.
Meanwhile, the Malaysian index value fell in value from 57.7 in 2017 to 58.5 in 2018 due to small changes in each sub-index.
Commenting on Malaysia’s Global Pension Index score, Mercer Malaysia chief executive officer (CEO) Hash Piperdy said that Malaysia maintained a stable C rating but action needs to be taken to address our ageing nation, where over five million Malaysians are expected to be over 60 years old by 2030 and nearly 10 million will be over 60 by 2050, according to the UN Department for Economic and Social Affairs.
“Malaysia’s sustainability score has decreased from 61.2 to 60.5, based on the index. There still exists a gap which poses risks in terms of the long-term sustainability in the system due to the ageing population, and the need to address it is crucial as there are still many Malaysians without sufficient pension savings on top of the Employees Provident Fund.
“It is high time for industry and community groups to look into Private Retirement Schemes ( PRS) and other ways to boost long term savings more seriously,” he added.
Some pension systems face a steeper path to long term sustainability than others, and all start from a different origin with their own unique factors at play.
Nevertheless, every country can take action and move towards a better system. In the long- term, there is no perfect pension system, but the principles of “best practice” are clear and nations should consider creating policy and economic conditions that make the required changes possible.
With the desired outcome of creating better lives, this year’s Index provided a deeper and richer interpretation of the global pension systems. Having now expanded to include Hong Kong, Peru, Saudi Arabia and Spain; the Index measured 34 systems against more than 40 indicators to gauge their adequacy, sustainability and integrity.
This approach highl ighted an important purpose of the Index – to enable comparisons of different systems around the world with a range of design features operating within different contexts and cultures.
This year’s Index revealed that many North-Western European countries lead the world in developing world class pension systems. The Netherlands, with an overall score of 80.3, beat Denmark to first place, a spot held by Denmark for six years, by 0.1. Finland bumped Australia (72.6) out of third place with an overall score of 74.5 and Sweden (72.5) coming in fifth place.
“The Index is an important reference for policymakers around the world to learn from the most adequate and sustainable systems,” Dr Knox said. “We know there is no perfect system that can be applied universally, but there are many common features that can be shared for better outcomes.