Singapore's pension system best in Asia
Report shows that Republic’s score is 2.4 points better than last year and above the global average
Singapore is the best performer in Asia when it comes to providing adequate and sustainable income for retirement, but there is room for improvement, said pensions expert Mercer yesterday.
The firm's annual report looked at 30 countries covering 60 per cent of the world's population and scored pension systems on their adequacy, sustainability, and integrity.
Singapore received a B rating with an overall index score of 69.4, up 2.4 points from a year earlier and well ahead of the global average of 59.9, it noted yesterday.
The increased score was down to improvements in both the adequacy and sustainability sub-indexes.
Mercer said no country achieved the elusive A grade and 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 citizens and permanent residents.
Mr Garry Hawker, Mercer's Asia zone wealth business coordinator and director of strategic research of growth markets, said in a statement: "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."
Mercer noted changes to the CPF last year (2016), including providing minimum pension top-up amounts for the poorest individuals, more flexibility in drawing down retirement pension amounts and increases to certain contribution rates and interest guarantees.
However, Mr Hawker 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."
This year's index showed Denmark retaining top position with an overall score of 78.9 - its sixth consecutive year on top - ahead of the Netherlands on 78.8 and Australia on 77.1.
Dr David Knox, Mercer senior partner and the report's author, said these countries adopt a strong multi-pillar approach, even if they have different takes on pension systems.
Mr Jacques Goulet, Mercer's president of health and wealth, noted that Japan, Austria, Italy and France are examples of developed economies who do not have a "sustainable model that will support current and future generations in their old age".
He said: "If left unchanged, these systems will create societal pressures where pension benefits are not distributed equally."