Melbourne Global Pension Index 2018 | Mercer Canada

Mercer Melbourne Global Pension Index 2018

Our Thinking / Aging Workforce

Mercer Melbourne Global Pension Index
Mercer Melbourne Global Pension Index
Calendar22 October 2018

The Melbourne Mercer Global Pension Index (MMGPI) is published by the Australian Centre for Financial Studies (ACFS) in collaboration with Mercer, with most of the  funding from the State Government of Victoria, as part of its ongoing support for leadership in the financial services sector.

The primary objective of this research is to benchmark global retirement income systems so we can all learn from each other and thereby improve our systems and generate better outcomes for our present and future retirees.



2018 RESULTS

CALCULATING THE MELBOURNE MERCER GLOBAL PENSION INDEX


THE GROWING TENSION BETWEEN ADEQUACY AND SUSTAINABILITY

The natural starting place to having a world class pension system is ensuring the right balance between adequacy and sustainability. However, policymakers are struggling to balance the twin goals of delivering financial security for their retirees that is both adequate for the individual and sustainable for the economy.

As highlighted in the opposite chart, all systems should aim to adjust their settings so they are moving towards the top right quadrant. Through the study, policymakers can understand the characteristics of leading systems and find ways to improve their own

GLOBAL GRADES

MOVING TOWARDS A BETTER PENSION SYSTEM

To improve the provision of adequate and sustainable retirement incomes around the world, countries should consider the following recommendations:

  • Gradually increase the average retirement age as life expectancies continue to rise
  • Increase the level of savings, both inside and outside pension funds, to ensure that more people are less reliant on the government in their future retirement years
  • Increase the coverage of private pensions across the labour force, including the self-employed and “gig” employees, to provide improved integration between various pillars
  • Reduce the access of benefits by members before retirement to ensure that the funds are preserved until retirement
  • Improve the transparency of the operations of pension plans thereby improving the understanding and trust of all stakeholders

WHAT DOES THE IDEAL SYSTEM LOOK LIKE?

There is no perfect pension system that can be applied universally, but there are many common goals that can be shared for better outcomes.

ADEQUACY

A minimum pension is provided to the poor that represents a reasonable percentage of average earnings in the community

At least 65% net (after tax) replacement rate at retirement for a full-time worker on an average income

At least 60% of accumulated retirement benefits to be taken as an income stream

SUSTAINABILITY

At least 70% of the working age population should be members of private pension plans

Current pension fund assets should be more than 100% of GDP to fund future pension liabilities

Labour force participation rate for those aged 55-64 should be at least 70%

INTEGRITY

A strong prudential regulator supervising private pension plans

Regular member communications including the provision of personal statements, projected retirement income and an annual report

Clear funding requirements for both defined benefit and defined contribution schemes

WHAT IS THE MMGPI?

Delivers the world’s most comprehensive comparison of pension systems

Measures 34 retirement income systems against more than 40 indicators

Covers 60% of the world’s population

Reviews global pension systems and assesses the benefits they provide, their ongoing sustainability in the context of ageing populations and the level of trust and transparency within their operations

Includes Hong Kong SAR, Saudi Arabia, Spain and Peru as 2018 additions

Benchmarks a country’s pension system based on three sub-indices: Adequacy, Sustainability and Integrity

Highlights the common challenges facing many countries

Recommends actions for improvement for each country

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