Singapore has broken into the top tier of an annual global pension index for the first time, while the Netherlands held on to the No. 1 ranking.
Iceland, Denmark and Israel make up the rest of the five countries that scored an A rating in this year’s Mercer CFA Institute Global Pension Index. The report released Wednesday evaluates 52 retirement systems based on grades for their adequacy, sustainability and integrity.
Singapore has steadily strengthened its pension system over the years, lifting its global ranking, said Tim Jenkins, the report’s lead author and a partner at Mercer in Sydney. More recently, officials have focused on boosting transparency — ensuring people better understand how much they can expect to receive in retirement.
Singapore’s pension system is built around the Central Provident Fund, which covers all employed citizens and permanent residents through mandatory contributions from both workers and employers. Back in 2009, the city-state managed only a C on the global index — by last year, it had risen to a B+.
“Singapore has gone all the way from C-grade to A-grade,” Jenkins said. “The economy in Singapore has also helped,” he said, adding that the index’s sustainability metric takes long-term economic growth into account.
In this year’s ranking, the US came in 30th, the UK 12th and Japan 39th. India was ranked lowest with a D rating, coming in behind Argentina, the Philippines and Turkey, which were also all rated D. Australia, whose pension system is highly regarded globally, dropped a notch to seventh position below Sweden.
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The authors also warned that rising global uncertainty meant that governments are increasingly seeking to direct pension funds’ capital into national priorities.
“Regulations and government actions — from tax policies to investment mandates — profoundly shape how pension funds can allocate capital,” Margaret Franklin, president and chief executive officer of the CFA Institute, said in a statement.
“As some systems look to pension funds to drive investments that are considered in the national interest, the professional investment community must guard against the unintended consequences that may arise when mandates or restrictions distort the system.”
