<!-- Swiftype Variables -->

Pension Funds

Melbourne Mercer Global Pension Index points to challenges of maintaining benefits

The 10th annual Melbourne Mercer Global Pension Index report on the adequacy and sustainability of national pension systems, released Monday, warns of growing challenges in balancing those twin goals as the Baby Boom generation retires.

The Netherlands took the top spot in the latest rankings — measuring 34 national pension systems for adequacy, sustainability and public trust — with a score of 80.3, edging out last year's leader, Denmark, at 80.2. At the other end of the spectrum, Argentina's pension system ranked 34th with a score of 39.2.

While the average score for all the measured systems edged up to 60.5 from 59.9, the report didn't accentuate the positive.

The tension between "what you offer and how long you can offer it" is growing as more baby boomers enter retirement, and the latest results should serve as a "wake-up call," said David Knox, author of Monday's report and a senior partner at Mercer Australia, in an interview.

While a number of national pension systems provide decent retirement benefits now, many will struggle to maintain those benefit levels over the long term, Mr. Knox predicted.

He cited Italy, Austria and Spain — with relatively high adequacy scores of 67 or 68 but sustainability rates of between 20 and 28 — as examples of countries that could "hit the pressure point" relatively soon.

2018 Melbourne Mercer Global Pension Index rankings
RankPrev.
rank
CountryScore
12Netherlands80.3
21Denmark80.2
35Finland74.5
43Australia72.6
56Sweden72.5
64Norway71.5
77Singapore70.4
810Chile69.3
99New Zealand68.5
1011Canada68.0
118Switzerland67.6
12T13Germany66.8
12T12Ireland66.8
1414Colombia62.5
1515U.K.62.6
16*Peru62.4
1716France60.7
18*Saudi Arabia58.9
1917U.S.58.8
2018Malaysia58.5
2120Brazil56.5
22*Hong Kong56.0
23*Spain54.4
2419Poland54.3
2521Austria54.0
2623Indonesia53.1
2722Italy52.8
2824South Africa52.7
2929Japan48.2
3025Korea47.3
3126China46.2
3227Mexico45.3
3328India44.6
3430Argentina39.2
*Newly added to the rankings in 2018.

"Most countries haven't moved up a lot" in the past year, but one that did improve noticeably was Indonesia, which introduced major pension reforms, said Mr. Knox. The new pension system put in place there recently helped lift Indonesia’s adequacy score to 47.3 from 40.1 the year before, boosting its overall score to 53.1 from 49.9.

By contrast, Japan's adequacy score improved — to 54.1 from 48 — because of the introduction of a new measure of household debt in Melbourne Mercer's analysis, said Mr. Knox. The Japanese, on average, have relatively low levels of household debt. High levels of debt can undermine what might appear to be adequate pension benefits, if those benefits have to be used to pay off that debt, he noted.

The Melbourne Mercer Global Pension Index is published by the Australian Centre for Financial Studies in collaboration with Mercer and the State Government of Victoria.