Australia has the most sustainable government pension systems in the world with the least amount of pressure to reform, while Thailand, Brazil and Japan have the least sustainable in the long term, according to a report from Allianz Global Investors.
Allianz's 2014 Pension Sustainability index measures the long-term sustainability of pension systems based on indicators such as “demographic developments, public finances and pension system designs,” according to the report.
Australia received the highest ranking of the 50 countries measured because it is a well-funded two-tiered system and is thus under the least pressure of all countries to reform its pension system, according to the report. Australia was the top-ranked country the last time Allianz compiled the index in 2011.
The United States ranked eighth in 2014, climbing nine spots from its 17th-place ranking in 2011, due primarily to worsening old-age dependency ratios in other countries and also because of a “positive revision of pension expenditure compared with the previous study.”
The report did note a significant improvement for the U.K., which had ranked 14th in 2011 and climbed up the rankings to 10th in 2014 due to the establishment of the country's National Employment Savings Trust, Britain's national auto-enrollment defined contribution system.
Thailand has the lowest ranking of all countries in 2014, because of its extremely low legal retirement age of 55, as well as a rapidly aging population.
Greece had been the lowest-ranked country in 2011, but the country has shown improvement due to reforms stipulated by central bank austerity packages and now ranks 43rd. Greece still faces challenges, according to the report.
Brazil had the second-lowest ranking because of its swiftly aging population, along with what the report calls an unsustainable current system, in which the effective retirement age is “substantially lower” than the legal age of 65, “with men able to draw down their full pension after 35 years of contributions, and women after 30 years.”
Japan had the third-lowest ranking due to its already-old population along with a “very high sovereign debt level,” according to the report.
The full report is available online.
