Malaysia Scored a C rating in the Global Pension Index

Malaysia’s score in the Global Pension Index has increased from 55.7 in 2016 to 57.7 in 2017, earning a C rating.

Measuring 30 countries and covering 60% of the world’s population, this year’s ninth edition of the Melbourne Mercer Global Pension Index urges countries with unsustainable pension systems to take action now, rather than risk the need to take even more drastic action in the future. Unsustainable pension systems in some countries need to learn from leading countries or risk creating intergenerational equity issues and disappointed retirees.

 

Commenting on Malaysia’s Global Pension Index score, Hash Piperdy, CEO of Mercer Malaysia said, “Malaysia has a strong pension infrastructure with some good features, however there are several major risks that should be addressed before we can move up to a B or even an A rating. These improvements are vital for the long-term sustainability and efficacy of the system.”

“The public sector pension system will only get more expensive over time and there are still far too many Malaysians without access to any form of pension savings. There should be a minimum level of support for the poorest individuals; and greater incentives for employers and other industry and community groups to set up Private Retirement Schemes (PRS).” he added.

This year’s Index expanded to include Colombia, New Zealand and Norway; the Index measures 30 systems against more than 40 indicators to gauge their adequacy, sustainability and integrity. This year’s Index reveals that Denmark, in its sixth year running, has retained the top position with an overall score of 78.9, ahead of the Netherlands and Australia at 78.8 and 77.1 respectively.

New entrants to the Index, Norway and New Zealand, achieved credible overall index values of 74.7 and 67.4 respectively. Both countries were noted as having a sound structure, with many good features, but have some areas for improvement. Colombia, with an overall index value of 61.7, was noted as a system with some good features, but also a system with some major risks and shortcomings that need to be addressed.   

Countries that have seen a significant improvement in their index value are those which have had high real economic growth during the last three years and where this is projected to continue during the next three years. These include China, India, Indonesia, Ireland and Malaysia. Conversely, countries with significant pension assets and high mandatory contributions but with lower real economic growth have seen a decline in their sustainability sub-index value. These include Canada, Denmark and the Netherlands.

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