Asia Is Getting More Attractive for Retirement

But countries and companies need to do more on adequacy and integrity.

Australia and Singapore topped the Asia Pacific charts in having great retirement systems. They got 75.3 and 70.8 in the 2019 Melbourne Mercer Global Pension Index, which compares 37 global retirement systems.

Hong Kong and Malaysia saw significant improvements and received 61.9 and 60.6 scores, respectively.

Against a global average of 59.3, Asia’s overall index value average was 52.1. Asia’s average adequacy value was more than 10 points short of the global adequacy average at 50.3, and the region’s integrity average fell nine points below the global integrity average. Systems around the world struggled with sustainability, with Asia’s average falling just 2.3 points shy of the global sustainability average of 50.4.

Mercer's wealth business leader for Asia Janet Li said Asia's retirement systems were on the right track.

"Asia's retirement systems should continue to focus on adequacy and integrity, where we are falling short of the global average. And, while we sit close to the global average for sustainability, it is generally the weakest sub-index both locally and globally. We need to consider sustaining inter-generational retirement systems which do not put undue burden onto future generations," said Li.

While Li admitted that "there is no one size or structure that fits every retirement system," she highlighted some common recommendations.

“This includes increasing the minimum level of support for our poorest aged individuals, ensuring that a portion of retirement benefits is taken as an income stream, and raising the age at which older people can access their retirement savings in line with increasing life expectancy,” Li added.

Professor Deep Kapur, director of the Monash Centre for Financial Studies, said the move away from defined benefit schemes towards defined contribution plans was playing an increasingly important role in the accumulation of individuals’ retirement savings.

“Maximizing risk-adjusted investment returns for defined contribution plans by diversifying the assets held by a pension fund is critical. It’s essential the state pension or retirement age is reconsidered in line with increasing longevity – a step some governments have already taken – to reduce the costs of publicly financed pension benefits,” he said.

As expected, European countries continue to dominate the Index, with the Netherlands receiving 81.0 and Denmark 80.3. In Asia, countries that did not perform well include China (48.7), India (45.8), Japan (48.3), Korea (49.8), Philippines (43.7), and Thailand (39.4). Thailand had the lowest index value of all 37 systems.