Who: Melbourne Mercer Global Pension Index report 2015
When: 19 October 2015
The 2015 Melbourne Mercer Global Pension Index (MMGPI) report was released on 19 October 2015. This seventh edition of MMGPI report measured 25 retirement income systems against more than 40 indicators, under the sub-indices of Adequacy, Sustainability andIntegrity.
The 2015 report rated Denmark as the country with the best retirement system for the fourth consecutive year in 2015, with an overall score of 81.7.
This study of retirement income systems in 25 countries confirmed that there is great diversity between the retirement systems around the world with scores ranging from 40.3 for India to 81.7 for Denmark.
Highlights of the Report
• Australia was ranked as having the most adequate pension system, however there was decline in the overall score from 79.9 in 2014 to 79.6 in 2015, moving further away from an elusive A grade that is given to pension systems that score above 80.
• Denmark held onto the top position for the fourth consecutive year in 2015 with an overall score of 81.7. Denmark’s well-funded pension system with its good coverage is the primary reason for its top spot.
• Denmark and Netherlands are the only countries to achieve an A grade in the history of the index.
• A number of countries have changed grade, with the Netherlands joining Denmark with an A-grade. Mexico and Italy improved to a C-grade.
• None of the countries in this study has an E-grade system, which would be represented by an index value below 35.
• India’s retirement system ranks last in the 2015 Melbourne Mercer Global Pension Index (MMGPI) report.
India’s Decline in the MMGPI Report 2015
India’s retirement system ranked last in the 2015 MMGPI report. India’s index value fell from 43.5 in 2014 to 40.3 in 2015, primarily due to a recent review conducted by the Economic Intelligence Unit that showed a material reduction in its household savings rate. Also in the same group are Indonesia, China, Japan and South Korea.
However, the National Pension System (NPS) is gradually gaining popularity in India. Continuing to improve education and communication will help increase coverage of pension arrangements for those working in the organized sector, particularly popularizing the corporate model of NPS.
The central government’s recent initiative Atal Pension Yojana (APY) that was launched in June 2015 is expected to encourage workers in the unorganized sector to voluntarily save for retirement.
MMGPI’s suggestions to improve each country’s Retirement Income System
• Increase the state pension age and/or retirement age to reflect increasing life expectancy and thereby reduce the level of costs of the publicly financed pension benefits
• Promote higher labour force participation at older ages, which will increase the savings available for retirement and limit the continuing increase in the length of retirement
• Encourage higher levels of private saving, both within and beyond the pension system, to reduce the future dependence on the public pension and rebalance the expectations of many workers
• Increase the coverage of employees and/or the selfemployed in the private pension system, recognising that many individuals will not save for the future without an element of compulsion or automatic enrolment
• Reduce the leakage from the retirement savings system prior to retirement to ensure that the funds saved are used for the provision of retirement income
• Review the level of public pension indexation as the level and frequency of increases are critical to ensure that the real value of a pension is maintained, balanced by its long term sustainability
• Improve the governance of private pension plans and introduce greater transparency to improve the confidence of plan members
About Melbourne Mercer Global Pension Index (MMGPI)
• The MMGPI report is the world’s most comprehensive comparison of pension systems.
• The Index is produced by the Australian Centre for Financial Studies and Mercer with the Index funded by the Victorian State Government.
• The report covers nearly 60 percent of the world’s population, and suggests how governments can provide adequate, sustainable benefits that protect their citizens, against longevity risk.
• The MMGPI is an important reference for policy makers around the world to learn from the most adequate and sustainable systems