Global pension systems 2020

[Bluesky]

An interesting look at how pension systems are coping as a result of the pandemic.

Savings & Retirement
These Are the World’s Best (and Worst) Pension Systems in 2020
By Matthew Burgess
October 19, 2020, 8:01 PM GMT+7
Netherlands ranked world’s best for third straight year
Pandemic has weakened sustainability of many pension systems

The Netherlands and Denmark have cemented their positions as having the best pension systems in the world, even as other countries falter during the Covid-19 pandemic, according to an annual global survey.

The countries again took the top two slots in the Mercer CFA Institute Global Pension Index published Tuesday, drawing praise for holding their nerve and not allowing citizens to drain their accounts during the crisis.

World's Best (And Worst) Pension Systems
Netherlands, Denmark lead with A grade retirement systems

The scores of over half of the countries (20) slipped this year as the world battles to limit the economic fallout from the Covid-19 crisis. The global recession has led to reduced pension contributions, lower investment returns and higher government debt in most countries.

“Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement,” said David Knox, the report’s author and senior partner at Mercer. Stretched public finances mean public benefits in particular are under pressure, he said.

We’re actually going to have to rely on ourselves with private provision more and more.”

Knox said pension systems such as those in Austria and Italy that hadn’t built up substantial private funds are likely to come under increasing pressure. Both were given a C grade, coming in 28th and 29th respectively.

Under Pressure
More than half of pension systems saw their index level fall in 2020

The rankings, based on more than 50 metrics, assess whether a system leads to improved financial outcomes for retirees, whether it is sustainable and whether it has the trust and confidence of the community.

Leaders and Laggards
The Netherlands ranked world's best retirement system, Thailand the worst
Rank Country Score out of 100
1 The Netherlands 82.6
2 Denmark 81.4
3 Israel 74.7
4 Australia 74.2
5 Finland 72.9
6 Sweden 71.2
7 Singapore 71.2
8 Norway 71.2
9 Canada 69.3
10 New Zealand 68.3
35 Mexico 44.7
36 Philippines 43.0
37 Turkey 42.7
38 Argentina 42.5
39 Thailand 40.8
The United States came in 18th with a C+ grade, a system that has good features “but also has major risks and/or shortcomings that should be addressed,” the report said, suggesting raising the minimum pension for low-income pensioners and increasing social security funding.

In top placed Netherlands, at present most workers enjoy defined benefit plans based on lifetime average earnings and a universal state pension. That means a worker gets about 80% of their pre-retirement earnings after stopping work, according to Organization for Economic Co-operation and Development data.

That’s a world away from the situation in Japan and the United Kingdom, where the so-called replacement rates are about 37% and 28% respectively.

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An additional concern this year is the decision by some governments -- including Australia and Chile -- to allow individuals to tap their savings early.

“While these measures alleviate the short-term financial burden on citizens, they compromise savings for the future,” said Janet Li, Mercer’s head of wealth in Asia. “The implications will be huge and may create ripple effects, too, onto social and economic fronts.”

Full article
https://www.bloomberg.com/news/articles ... emium-asia