SINGAPORE - Singapore topped Asia in providing adequate and sustainable income for retirement but there is room for improvement, said pension expert Mercer on Monday (Oct 23).
The 2017 Melbourne Mercer Global Pension Index, which looked at 30 countries covering 60 per cent of the world's population, scores pension systems on their adequacy, sustainability, and integrity.
Singapore received an overall B rating with index score of 69.4, up 2.4 points from a year ago, versus a global average of 59.9 points.
Mercer said no country achieved the elusive "A" grade and it urged countries with unsustainable pension systems to take action now, rather than risk the need to take even more drastic action in the future.
Singapore's retirement income system is mainly based on the Central Provident Fund (CPF) which covers all employed Singaporeans and permanent residents. The Government implemented changes to the CPF in 2016 which included providing minimum CPF top-up amounts for the poorest individuals, more flexibility in drawing down retirement amounts and increases to certain contribution rates and interest guarantees.
"As one of the most developed pension schemes in Asia, Singapore has continued to make improvements through CPF in providing more flexibility to its members," said Mr Garry Hawker, Mercer's Asia zone wealth business coordinator and director of strategic research of growth markets.
But he added: "The overall index value for the Singaporean system could be further increased by reducing the barriers to establishing tax-approved group corporate retirement plans, opening CPF to non-residents who comprise more than one-third of the labour force and increasing the labour force participation rate at older ages as life expectancies rise."
The Singapore Government implemented changes to the CPF in 2016 which included providing minimum CPF top-up amounts for the poorest individuals, more flexibility in drawing down retirement amounts and increases to certain contribution rates and interest guarantees.
This year's index showed Denmark, in its sixth year running, retaining top position with an overall score of 78.9, ahead of the Netherlands at 78.8 and Australia at 77.1.
Jacques Goulet, Mercer president of health and wealth, said Japan, Austria, Italy and France are examples of developed economies whose pension systems do not represent a sustainable model that will support current and future generations in their old age.
"This is due to a combination of factors including a lack of assets set aside for the future, low labour force participation at older ages, and significant demographic changes towards an ageing population," he said. "If left unchanged, these systems will create societal pressures where pension benefits are not distributed equally between generations."