Professional Documents
Culture Documents
Melbourne Mercer
Global Pension Index
Contents
Letter from ACFS ........................................................ 2
Preface ......................................................................... 3
1. Executive summary ............................................... 4
2. Introductory comments ...................................... 10
3. Changes from 2009 to 2010 ................................ 16
4. The adequacy sub-index .................................... 20
5. The sustainability sub-index.............................. 32
6. The integrity sub-index ...................................... 42
7. A brief review of each country ........................... 54
References and attachments ................................. 62
The Australian Centre for Financial Studies is delighted to be a partner in the research which
has resulted in the 2010 Melbourne Mercer Global Pension Index (the Index).
ACFS specialises in leading edge finance and investment research, aiming to boost the global
credentials of Australia’s finance industry, bridge the gap between research and industry, and
support Australia as an international centre for finance practice, research and education. ACFS
facilitates industry-relevant and rigorous research and consulting, thought leadership and
independent commentary. Drawing on expertise from academia, industry and government,
the Centre promotes excellence in financial services.
In its second year, the Index not only assists discussion and research on public policy matters
related to international retirement systems, but extends this opportunity through the inclusion
of three new countries and the beginning of a longitudinal perspective.
The response received following the launch of the 2009 Index demonstrated its value to
government, industry and academia in contributing to the debate on how we best provide
for the ageing population. In particular, the nature of the Index provides some insight to the
challenge of balancing the adequacy of benefits with the sustainability of pension systems,
a matter of increasing concern in the post-Global Financial Crisis environment.
As part of its role in the project, ACFS has convened an expert reference group to ensure that
the final Index represents an independent and unbiased view. Many thanks to the members
of the reference group:
Syd Bone, Chairman, Australian Centre for Financial Studies
Prof Kevin Davis, University of Melbourne and Research Director ACFS
Jeremy Duffield, Managing Director, Vanguard Investments Australia
Dr Vince FitzGerald, Chairman, Allen Consulting
Prof Richard Heaney, RMIT University
Ian Silk, Chief Executive, AustralianSuper
Melbourne Mercer Global Pension Index
Our thanks to Dr David Knox and Adam Solomon of Mercer, who have produced an excellent
outcome and who have been a pleasure to deal with throughout the project. Thanks also to the
Department of Innovation, Industry and Regional Development for supporting this second study.
This report represents research that compares fourteen different retirement income systems around the world,
building on last year’s pilot study of eleven systems.
Last year’s report generated considerable discussion and controversy as any comparison of different system raises
issues that are not straightforward or easy to compare. After all, there exist many approaches that have been affected
by a range of social, political, historical, cultural and economic influences. Notwithstanding these differences, we
believe that there are certain features or outcomes of retirement income systems that can be measured and typify
strength and longer term sustainability.
There have been some changes to the indicators used in this year’s report as we have included a broader range
of topics including:
The overall index value for each country takes into account more than forty indicators which are scored from objective
data or assessments. Of course, the weighting of each indicator can be debated but we have given greater weight to
the more important factors. Nevertheless we recognise that each country’s index value would move with a change in
weighting. For this reason, one cannot be definite and state that one country’s system is better than another when the
difference is small, say 0.5 in the overall index value. However, when there is a difference of say, five or more we can
state that the higher index value indicates that this country has a system that provides more adequate benefits, is more
sustainable and/or has greater integrity than the other country.
The preparation of an international report of this nature requires input, hard work and cooperation from many
individuals and groups. I would like to thank you all.
First, the financial support of the Victorian Government for this project is greatly appreciated. Without its funding,
the concept and development of this index would not have moved from an idea to reality.
Second, Professor Deborah Ralston and her team at the Australian Centre for Financial Studies have played a pivotal role
in this project, particularly in establishing an expert reference group of senior and experienced individuals who provided
helpful suggestions and comments throughout the project.
Third, our Mercer colleagues around the world have been invaluable in providing information in respect of their
countries’ retirement income systems, checking our interpretation of the data, and providing incisive comments.
Melbourne Mercer Global Pension Index
As we look to the future, we would value your feedback, suggestions and comments so that the next report will
be of even greater value than this second report. My hope is that you enjoy reading the report and that it provides
new insights into the provision of financial security in retirement to our older citizens.
Dr David Knox
Senior Partner
Mercer
The provision of financial As the OECD (2009b) notes: “classifying pension systems and different retirement
income schemes is difficult.” Furthermore, comparing these systems is certain
security in retirement to be controversial as every system has evolved from each country’s particular
economic, social, cultural, political and historical circumstances. There is no
is critical for both perfect system that can be applied universally around the world. However there
individuals and societies are certain features and characteristics of retirement income systems that are
likely to lead to improved benefits, an increased likelihood of future sustainability
as most countries of the system, and a greater level of confidence and trust within the community.
grapple with the social This study of fourteen countries has confirmed that no system is perfect. Indeed,
for the second year in a row, no country’s system has received an index value
and economic effects above 80, which we consider represents an A-grade retirement income system.
However, several countries have an index value between 65 and 80, which
of ageing populations. represents a B-grade system and – with some adjustments or improvements –
Yet, a comparison of these countries could be re-classified as A-grade systems. (The changes that
would raise these systems to the A-grade level are discussed in Chapter 7.)
the diverse retirement
We believe that none of the countries in this pilot study has an E-grade system,
income systems around which would be represented by an index value below 35. A score between 35
and 50, which represents a D-grade system, indicates a system that has some
the world is not sound features but where there exist major omissions or weaknesses. A D-grade
straightforward. classification may also occur in the relatively early stages of the development of
a particular country’s system.
Melbourne Mercer Global Pension Index
A first class and robust retirement income system that delivers good
A >80 Nil
benefits, is sustainable and has a high level of integrity.
Netherlands A system that has a sound structure, with many good features,
Switzerland but has some areas for improvement that differentiate it from an
B 65–80 Sweden A-grade system.
Australia
Canada
UK A system that has some good features, but also has major risks
Chile and/or shortcomings that should be addressed. Without these
Brazil improvements, its efficacy and/or long-term sustainability can
C 50–65 Singapore be questioned.
USA
France
Germany
A system that has some desirable features, but also has major
Japan
D 35–50 weaknesses and/or omissions that need to be addressed. Without
China
these improvements, its efficacy and sustainability are in doubt.
The following table shows the overall sub-index and 25 percent for the will be able to provide benefits that
index value for each country, together integrity sub-index. The different are maintained in the future.
with the index value for each of weightings are used to reflect the The integrity sub-index has a focus on
the three sub-indices: adequacy, primary importance of the adequacy the private sector system and therefore
sustainability and integrity. Each index sub-index which represents the has a more restrictive scope than the
value represents a score between benefits that are currently being other two sub-indices. Nevertheless
0 and 100. provided together with some the private sector represents a critical
important benefit design features. component in most country’s overall
The overall index value represents
The sustainability sub-index has a system as the public pillar cannot be
the weighted average of the three
focus on the future and measures expected to provide adequate benefits
sub-indices. The weightings used are
various indicators which will influence for all over the longer term.
40 percent for the adequacy sub-index,
the likelihood that the current system
35 percent for the sustainability
Sub-index values
Calculating
— the Melbourne Mercer Global Pension Index
indicators including
Coverage
Benefits Regulation
Total assets
Savings Governance
Contributions
Tax support Protection
Demography
Benefit design Communication
Government
Growth assets Costs
debt
Melbourne
Mercer Global
Pension Index
The final chapter makes several Promoting higher labour force Reducing the leakage from the
suggestions to improve each country’s participation at older ages, retirement savings system prior
retirement income system. Although particularly as many individuals to an individual’s retirement
Melbourne Mercer Global Pension Index
each system reflects a unique history, now remain in good health for
Promoting greater diversity in the
there are some common themes as longer periods
provision of retirement income,
many countries face similar problems
Encouraging (or requiring) higher whilst also requiring that a least a
in the decades ahead. These common
levels of saving, both within the portion of the accumulated benefit
challenges include:
pension system and beyond it be taken as income.
Increasing the state pension age
Increasing the coverage of employees
and/or retirement age to reflect
in the private pension system, where
increasing life expectancy, both
it continues to be voluntary
now and in the future
The structure and This situation is improving and This study, which is a follow-up to
the OECD in particular has made last year’s pilot study1, compares the
characteristics of significant progress in recent years. retirement income systems of fourteen
Nevertheless it must be recognised that countries spread over five continents
pension systems around reliable data in respect of some key and highlights both the considerable
the world exhibit great indicators remains a significant issue. diversity and the positive features
For this reason, this report uses a wide that are present in many systems.
diversity with a wide variety of data sources. Notwithstanding these highlights, the
study also confirms that no pension
range of features and These challenges of data and
system is perfect and that every
benchmarking should not, however,
norms. Comparisons prevent the comparing of retirement
system has some shortcomings. In
Chapter 7, suggestions are made
income systems. This topic, within
are not straightforward. the context of our ageing populations,
for improving the efficacy of each
country’s retirement income system.
In addition, the lack is too important to be ignored.
In that respect it is hoped that this
Furthermore, there is no doubt that
of readily available policies and practices adopted in
study will act as a stimulus for each of
the countries in the study (and indeed,
some countries provide valuable
and comparable data lessons, experience or ideas for the
other countries as well) to review their
retirement income system and to
in respect of many development or reform of pension
consider making improvements so that
systems in other countries.
countries provides future retirement incomes for their
citizens can be improved.
additional challenges
for such a comparison.
Melbourne Mercer Global Pension Index
1
Mercer (2009), Melbourne Mercer Global Pension Index, Melbourne Centre for Financial Studies, Melbourne.
2
World Bank (1994), Averting the Old Age Crisis, Oxford University Press
3
Holzmann and Hinz (2005), Old Age Income Support in the 21st Century, The World Bank
4
Donghyun Park (2009), Ageing Asia’s Looming Pension Crisis, ADB Economics Working Paper Series No. 165
5
Laza Kekic, The Economist Intelligence Unit index of democracy, The World in 2007
than occurred in the many countries is the ongoing increase The previous report did not compare
in life expectancies as reported by the the costs of operating each country’s
2009 pilot study. United Nations. These changes increase retirement income system. Yet costs
the difference between the state pension represent an important factor in
age and life expectancy which, in turn, determining the financial outcome
increases the expected number of years for members. Unfortunately
in retirement. It highlights the need for comparable data is not available and,
governments to continue to review their in some cases, is not even recorded.
state pension or retirement age.
6
This level has been chosen as it is slightly higher than the OECD average of 27% for first tier benefits as
mentioned in OECD (2009b), p157.
7
World Bank (1994), p295
It should be noted that these The target benefits from a mandatory Calculation
calculations assume no promotion system should be less than 70 percent The maximum score for this indicator
of the individual throughout their of final earnings to allow for individual is obtained for any country with a result
career; that is, the individual earns the circumstances and some flexibility. between 70 percent and 100 percent.
median income throughout. Therefore An objective of between 45 percent Interestingly, only Brazil lies within
replacement rates based on lifetime and 65 percent of final earnings is this range, with only the Netherlands
median income will be higher than considered reasonable. Using the lying above it at 105.5 percent.
when expressed in terms of final salary ratios between lifetime earnings Any score outside this range scores less
for most individuals. and final earnings, the target for than the maximum with a zero score
a net replacement rate (i.e. after being obtained for a result less than
The OECD expresses a target
allowing for personal income taxes 20 percent or more than 150 percent.
replacement rate of 70 percent of final
and social security contributions)
earnings8 which includes mandatory For China and Singapore, the OECD
for a median-income earner from a
pension for private sector workers data lists the net replacement rate
mandatory system should be within
(publicly and privately funded) and for mean income earners; we have
the range of 70–100 percent of median
typical voluntary occupational pension therefore performed a positive
lifetime earnings (revalued with
plans for those countries where such adjustment to these figures in order to
earnings growth).
schemes cover at least 30 percent of align them with the other results based
the working population. A net replacement rate below 70 on median-income earners.
percent of lifetime earnings suggests
This indicator for the adequacy
a significant reliance on voluntary
sub-index should only include
savings whereas a figure above 100
mandatory components of a retirement Calculating A2
percent does not provide the flexibility
income system for private sector — net replacement rate for
for individual circumstances and
workers, as voluntary plans that may median income earner
may suggest overprovision. The OECD
include only 30 percent of the working
average for a median-income earner is 10.0
population do not represent a good
< 10.0
70%
56%
20%
Melbourne Mercer Global Pension Index
0.0
net
replacement rate score
8
OECD (2009a), OECD Private Pensions Outlook 2008, p121
9
OECD (2009b), Pensions at a Glance 2009, p121
10.0
depend on the benefits arising from
their savings in the Central Provident
the total pension system (which was 20%
Fund prior to retirement. On the other
covered in the previous two questions)
hand, the Netherlands result may be
as well as the level of household
considered to produce a pension that is 6.5%
savings outside the pension system. 4.6
slightly too high for a median-income
In some countries, these savings
earner, whilst also not providing the
may represent an important factor -5%
appropriate individual flexibility
in determining the financial support
throughout their lifetime. The Chinese
available to the aged.
figures have been adjusted to reflect
0.0
the varying levels of provision that
exist in practice.
Calculation household
saving rate score
The rate of household savings is not
Sources of data readily available and we have therefore
used data from the Economist Commentary
OECD (2009b), Pensions at a Glance
Intelligence Unit and calculated the The household saving rate includes
2009, p121, for OECD countries
saving rate in the following way: mandatory social security or private
China and Singapore: OECD Pensions at sector savings and therefore this
Household saving rate measure is not restricted to voluntary
a Glance – Asia Pacific Edition 2009, p31
= (PDIN – PCRD) savings. Nevertheless, it provides
Brazil and Chile: Mercer calculations PDIN some indication of the level of current
based on estimated median income
where: income that is being set aside from
PDIN = Personal disposable income current consumption.
Weighting
PCRD = Private consumption
As noted in the commentary for
Source of data
Question A1, these results represent a To provide some longer-term
Data provided by the Economist
major outcome to assess any retirement perspective than may occur in annual
Intelligence Unit.
income system. As this indicator is figures, we have averaged the 2008 and
likely to reflect the benefits provided 2009 measurements.
Weighting
Melbourne Mercer Global Pension Index
10
Private pension plans include both defined benefit and defined contribution plans and may pay lump-sum or
pension benefits. They also include plans for public sector and military employees.
score
pension system should be to provide
The answers were sourced from Mercer 4
income during retirement. Of course,
consultants in each country.
this does not imply that a lump-sum
payment is not a valuable benefit. It 2
Weighting
often is. Indeed, in a recent World Bank
Ensuring that the accumulated
paper, Rocha and Vittas (2010) suggest 0
benefits are preserved until retirement
that policymakers should target an 0 10 20 30 40 50 60 70 80 90 100
represents an important design feature
adequate level of annuitization but % of retirement benefit as income
of all pension arrangements. Hence,
should be wary of causing excessive
this desirable feature has been given a
annuitization. Hence, this indicator
10 percent weighting in the adequacy
focussed on whether there were any Commentary
sub-index.
requirements in the system for at least There is considerable variety between
part of the benefit to be taken as an countries with some countries
income stream, and if so, what level requiring most or all of the benefit to
of annuitization is required. be converted into a lifetime annuity
(e.g. the Netherlands and Sweden)
Calculation whereas many countries have no
There is no single answer that requirement at all (e.g. Australia, Chile
represents the correct proportion of and China).
a retirement benefit that should be
annuitized. However a maximum score Source of data
should be achieved where between 60 The answers were sourced from Mercer
percent and 80 percent of the benefit consultants in each country.
is required to be converted into an
Weighting
Melbourne Mercer Global Pension Index
Calculation
Each of the three questions were
scored on a three-point scale with a
score of 2 for “yes”, 1 if it was applied in
some cases and 0 for “no”.
Melbourne Mercer Global Pension Index
Weighting
Home ownership represents a desirable
feature of financial security in
Melbourne Mercer Global Pension Index
11
Hinz R, Rudolph H P, Antolin P and Yermo J (2010), Evaluating the Financial Performance of Pension Funds,
The World Bank, Washington, p 2
4
The answers were sourced from Mercer
consultants in each country based on
available data.
2
Weighting
0
0 10 20 30 40 50 60 70 80 90 100
Asset allocation represents an
important feature of all funded
% in growth assets
retirement systems. This indicator
has therefore been given a 5 percent
weighting in the adequacy sub-index.
12
The application of means tests in respect of state pensions also represents an important component of the long-
term financial sustainability for many systems. However, the measurement of the financial effect of means testing is
problematic and its application varies considerably between countries. It was therefore excluded from this sub-index.
13
The German figure used was the voluntary occupational percentage increased by 20 percent of the voluntary
personal percentage as the total percentage was not provided.
14
This question does not include contributions arising from statutory minimum levels of funding for defined
benefit plans as these plans do not represent mandatory arrangements.
Sources of data
The answers were sourced from Mercer
Melbourne Mercer Global Pension Index
Weighting
This item represents one of several
key indicators representing desirable
features of a sustainable system.
A weighting of 15 percent in the
sustainability sub-index is used for
this indicator.
15.
This reduction does not include sovereign reserve funds which have been set aside for future pension
payments as these have been considered in Question S2.
16
www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm
17
www.swfinstitute.org
Source of data
The answers were sourced from Mercer
consultants in each country.
Weighting
This item has a weighting of 5 percent
in the sustainability sub-index as it
is not considered as critical as the
Melbourne Mercer Global Pension Index
earlier indicators.
The integrity sub-index The private sector pillar is, however, In each of the three broad areas,
important because without it the several questions have been asked
is determined by government becomes the only provider, to ascertain the requirements and
which is not a desirable or sustainable situations that apply to private sector
considering three broad long-term outcome. A sound and well pension plans in each country.
areas of the private regulated private sector pension
Full details of the values in respect of
system, which has the confidence of
each indicator in the integrity sub-
sector pension system, the community, represents an
index are shown in Attachment 3.
important component of most
namely: regulation and countries’ retirement income systems.
Source of data
governance; protection The country with the highest value As the integrity sub-index is based on
for the integrity sub-index is the the operations of the private sector
for members; and costs. Netherlands (91.4), with the lowest pension industry in each country, the
As this sub-index is only value being for China (43.4). As noted answers were sourced from Mercer
above, this sub-index covers three consultants in the relevant countries,
concerned with the broad areas affecting private sector except where noted.
pension plans and the better scores
private sector pension were achieved by countries with well
plans (i.e. the second developed private pension industries.
Question R2 The following table was provided to assist in answering these questions.
Are private sector pension plans Scale Description Examples of activity by the regulator
required to submit a written Receives reports from plans but does not
1 Inactive
report in a prescribed format to follow up
a regulator each year? Receives annual reports, follows up with
Does the regulator make industry 2 Occasionally active questions but has limited communication
data available from the submitted with plans on a regular basis
forms on a regular basis? Receives annual reports, follows up with
3 Moderately active questions and has regular communication
How actively does the regulator
with plans, including on-site visits
(or protector) discharge its
supervisory responsibilities? Obtains information on a regular basis
Please rank on a scale of 1–5. from plans and has a focus on risk-based
4 Consistently active
regulation. That is, there is a focus on
plans with higher risks
Obtains information on a regular basis
from plans and has a focus on risk-based
5 Very active regulation. In addition, the regulator often
leads the industry with ideas, discussion
papers and reacts to immediate issues
Objective Weighting
These questions were designed to The first and third questions were
assess the level of supervision and each given a 5 percent weighting, with
the involvement of the regulator with the second question being given a 2.5
the industry. percent weighting, resulting in a total
weighting of 12.5 percent for these
Calculation three questions.
The last question was scored on a five-
point scale as shown in the table. It is
important to note that this question
did not assess the quality of the
Melbourne Mercer Global Pension Index
Costs
What percentage of total private Yet, in the final analysis many costs Calculation
pension assets is held in various will be borne by members and thereby For the first question, each type of plan
types of pension funds? affect the provision of their retirement was given a weight ranging from 1 for
income. We have therefore used two individual retail or insurance contracts
What percentage of total private
proxies for this indicator. to 10 for a central fund. These scores
pension assets is held by the
largest ten pension funds/ The first question represents an were then weighted by the pension
providers or by funds that are attempt to ascertain the proportion industry characteristics for each country.
larger than $US10 billion? of each country’s pension industry that For the second question, we considered
is employer-sponsored plans, not-for- the size of the assets held by the ten
Objective profit plans and retail funds, which largest providers or funds, or by funds
As noted by Luis Viceira in Hinz et may be employer based or individual that exceeded $US10 billion19. A score
al (2010), costs are one of the most contracts. Each type of plan is likely to of 1 was given when these assets were
important determinants of the long have a different cost implication which less than ten percent of all assets
run efficiency of a pension system. influences the overall cost structure of rising to a maximum score of five when
He goes on to comment that: the industry. these assets represented more than
“Unfortunately, there is very little The second question highlights the fact 75 percent of all assets.
transparency about the overall costs of that scale matters. That is, it is likely
running most pension systems or the total that as funds increase in size, their
direct and indirect fees that they charge to costs as a proportion of assets will
participants and sponsors.”18 reduce and some of these benefits will
be passed onto members.
This is absolutely correct. The huge
variety of pension systems around
the world, with a great diversity of
retail, wholesale and employer sponsor
arrangements means that some
administrative or investment costs are
clearly identified whereas others are
borne indirectly or directly by providers,
sponsors or third parties.
Melbourne Mercer Global Pension Index
18
Hinz R, Rudolph H P, Antolin P and Yermo J (2010), Evaluating the Financial Performance of Pension Funds,
The World Bank, Washington, p259
19
www.pionline.com/article/20090907/CHART2/908289986/-1/WWTOPFUNDS
Weighting
Each question was given a 5 percent
weighting in the integrity sub-index,
resulting in a total of 10 percent for
these two questions.
a part pension
continuing to review the minimum
The Canadian index value fell from
pension for the poorest pensioners, improving the level of
73.2 in 2009 to 69.9 in 2010 due, in
notwithstanding the 2008 reforms communication required from
part, to the decline in asset values in
pension plans to members.
2008 expressed as a percentage of GDP introducing arrangements to
and the increase in government debt, protect the interests of both parties The Chinese index value fell from 48.0
both which were caused by the global in a divorce in 2009 to 40.3 in 2010 due primarily
financial crisis. to a recognition that the national
enabling individuals to retire gradually
pension system does not yet cover
whilst receiving a part pension.
the whole country.
The Chilean index value rose slightly
from 59.6 in 2009 to 59.9 in 2010.
CIA (2009), The World Factbook, CIA. Park D (2009), Ageing Asia’s Looming Pension Crisis, ADB
Economics Working Paper Series No. 165
Economist Intelligence Unit,
Market Indicators and Forecasts Pensions and Investments
www.eiu.com www.pionline.com
Hinz R, Rudolph H P, Antolin P and Yermo J (2010), Evaluating Rocha R and Vitta D (2010), Designing the
the Financial Performance of Pension Funds, The World Payout Phase of Pensions Systems, World Bank
Bank, Washington. Policy Research Working Paper 5289
Holzmann R and Hinz R (2005), Old Age Income Support Sovereign Wealth Fund Institute
in the 21st Century, The World Bank. www.swfinstitute.org
International Labour Office (2009), Key Indicators United Nations (2008), World Population Prospects
of the Labour Market, 6th Edition, ILO. http://esa.un.org/unpp/
Ministry of Manpower, Singapore World Bank (1994), Averting the Old Age Crisis,
www.mom.gov.sg Oxford University Press.
OECD (2009a), OECD Private Pensions Outlook 2008, OECD. World Bank (2010), World Development Indicators 2010.
Attachment 1: Score for each country for each indicator in the adequacy sub-index
Netherlands
Switzerland
Singapore
Question
Germany
Australia
Sweden
Canada
France
China
Japan
Brazil
Chile
USA
UK
What is the minimum percent of the
A1 average wage that a single aged person 17.5% 6.5 10.0 10.0 5.7 5.0 6.5 4.5 4.5 10.0 0.2 8.0 7.0 4.5 4.0
will receive?
What is the net replacement rate for a
A2 25% 7.8 10.0 8.7 5.3 3.6 9.1 8.3 4.1 8.9 0.0 8.8 10.0 4.9 5.4
median-income earner?
What is the net household saving rate in
A3 10% 3.5 5.0 4.7 3.4 9.0 6.3 5.9 2.6 2.7 8.4 5.1 7.5 2.2 4.8
the economy?
Are voluntary member contributions
by a median income earner to a funded
A4 pension plan treated by the tax system 5% 10.0 10.0 10.0 10.0 0.0 10.0 10.0 0.0 10.0 10.0 5.0 10.0 10.0 10.0
more favourably than similar savings in
a bank account?
Is there a minimum access age to
receive benefits from the private
A5 pension plans (except for death, 10% 8.3 0.0 3.3 5.0 8.3 10.0 10.0 5.0 3.3 6.7 6.7 5.3 6.7 6.3
invalidity and cases of financial
hardship)? If so, what is the current age?
What proportion, if any, of the
retirement benefit from the private
A6 10% 0.0 5.5 5.0 0.0 0.0 5.0 0.0 0.0 7.5 4.6 7.5 0.0 10.0 0.0
pension arrangements is required to be
taken as an income stream?
On resignation, are members normally
entitled to the full vesting of their
accrued benefit?
After resignation, is the value of the
member’s accrued benefit normally
A7 7.5% 10.0 10.0 6.0 10.0 8.0 9.0 5.0 6.0 10.0 10.0 10.0 10.0 10.0 5.0
maintained in real terms?
Can a member’s benefit entitlements
normally be transferred to another
private pension plan on the member’s
resignation from an employer?
Upon a couple’s divorce or separation,
are the individuals’ accrued pension
A8 5% 10.0 0.0 10.0 0.0 0.0 5.0 10.0 10.0 10.0 10.0 2.5 10.0 10.0 10.0
benefits normally taken into account in
the overall division of assets?
What is the level of home ownership in
A9 5% 7.0 7.7 6.3 6.6 9.7 5.0 3.3 5.9 4.0 9.9 5.4 1.6 7.0 7.7
the country?
What is the proportion of total pension
A10 5% 8.5 7.0 10.0 9.6 4.8 5.7 8.5 8.3 6.7 2.5 7.0 9.6 10.0 10.0
assets invested in growth assets?
Adequacy sub-index 100% 68.1 72.9 75.0 52.1 48.3 74.9 64.1 42.2 76.1 43.7 72.8 73.1 64.9 54.3
Each question is scored for each country with a minimum score of 0 and a maximum score of 10.
Netherlands
Switzerland
Singapore
Question
Germany
Australia
Sweden
Canada
France
China
Japan
Brazil
Chile
USA
UK
What proportion of the employed
S1 workforce are members of private 20% 8.1 0.0 4.7 4.2 0.1 7.3 6.6 3.1 9.4 9.4 9.4 9.4 4.9 4.7
pension plans?
What is the level of pension assets,
expressed as a percent of GDP, held in
S2 private pension arrangements, public 20% 7.1 1.4 6.4 3.5 0.2 0.6 1.2 3.2 8.1 4.6 5.7 8.6 5.2 7.3
pension reserve funds and protected
book reserves?
What is the current gap between life
expectancy at birth and the state
pension age?
S3 20% 5.6 8.0 5.5 6.2 5.0 1.8 6.3 1.6 6.0 4.2 5.4 4.1 6.2 8.2
What is the projected gap in 2030?
What is the projected old-age
dependency ratio in 2030?
What is the level of mandatory
contributions that are set aside for
S4 15% 7.5 0.0 6.2 8.3 3.3 0.0 0.0 2.0 6.7 5.0 7.2 7.1 0.0 3.4
retirement benefits (i.e. funded),
expressed as a percentage of wages?
What is the labour force participation
S5 10% 4.9 4.2 5.7 4.5 4.1 0.3 5.1 6.6 3.7 4.8 8.6 7.3 5.3 6.3
rate for those aged 55–64?
What is the level of adjusted
government debt (being the gross
public debt reduced by the size of any
S6 10% 8.8 6.0 5.0 9.9 9.4 4.9 5.2 0.0 5.9 10.0 7.6 7.3 5.5 4.5
sovereign wealth funds that are not
set aside for future pension liabilities),
expressed as a percentage of GDP?
In respect of private pension
arrangements, are older employees able
to access part of their retirement savings
or pension and continue working (e.g.
S7 5% 10.0 0.0 7.5 0.0 0.0 10.0 7.5 5.0 10.0 10.0 10.0 5.0 7.5 5.0
part time)? If not, are there other tax
advantaged pre-retirement vehicles
available to help transition workers into
retirement that are commonly used?
Sustainability sub-index 100% 71.7 29.1 56.8 54.7 29.0 29.7 42.3 27.9 71.6 63.6 72.9 71.8 47.1 59.0
Each question is scored for each country with a minimum score of 0 and a maximum score of 10.
Attachment 3: Score for each country for each indicator in the integrity sub-index
Score for each country
Question weight
Netherlands
Switzerland
Singapore
Question
Germany
Australia
Sweden
Canada
France
China
Japan
Brazil
Chile
USA
UK
Do private sector pension
plans need regulatory approval
or supervision to operate?
Is a private pension plan
required to be a separate legal 15% 10.0 10.0 10.0 10.0 10.0 6.7 8.3 8.3 10.0 10.0 8.3 10.0 10.0 10.0
entity from the employer?
Is a private pension plan
required to have separate
assets from the employer?
Are private sector pension
plans required to submit a
written report in a prescribed
format to a regulator each
year?
Regulation and Governance (R1–R4)
Netherlands
Switzerland
Singapore
Question
Germany
Australia
Sweden
Canada
France
China
Japan
Brazil
Chile
USA
UK
Describe the required
minimum level of funding for
DB and DC schemes and the
12.5% 7.0 8.0 9.0 10.0 5.0 5.0 4.0 9.0 10.0 6.0 7.0 8.0 7.0 7.0
requirements to reach
full funding when this does
not occur.
What are the limits, if any, on
the level of in-house assets
5% 10.0 10.0 10.0 10.0 10.0 5.0 5.0 0.0 10.0 10.0 10.0 10.0 10.0 5.0
held by a private sector
pension plan?
Are the members’ accrued
Protection and Communication for Members (P1–P7)
Netherlands
Switzerland
Singapore
Question
Germany
Australia
Sweden
Canada
France
China
Japan
Brazil
Chile
USA
UK
What percentage of total pri-
vate pension assets is held in
various types of pension plans?
Costs
What percentage of total pri- 10% 4.6 6.2 6.1 5.5 4.9 4.1 6.4 8.2 7.4 10.0 7.7 6.7 6.5 5.5
vate pension assets is held by
the largest ten pension funds/
providers or by funds that are
larger than $US10 billion?
Integrity sub-index 100% 82.4 81.7 80.1 79.8 43.4 56.8 54.4 65.2 91.4 79.5 79.5 83.5 85.3 60.0
Each question is scored for each country with a minimum score of 0 and a maximum score of 10.
Expert Reference Group: Syd Bone, Professor Kevin Davis, Jeremy Duffield,
Dr Vince FitzGerald, Professor Richard Heaney, Professor Deborah Ralston, Ian Silk
Feedback/Contact: globalpensionindex@mercer.com
www.globalpensionindex.com
www.australiancentre.com.au
www.mercer.com/globalpensionindex
Citation: Mercer (2010), Melbourne Mercer Global Pension Index, Australian Centre for Financial
Studies, Melbourne
This report is intended as a basis for discussion only. Whilst every effort has been made to ensure
the accuracy and completeness of the material in this report, the authors give no warranty in that
regard and accept no liability for any loss or damage incurred through the use of, or reliance upon,
this report or the information contained herein.
©Australian Centre for Financial Studies and Mercer 2010
About the Australian Centre for Financial Studies
The Australian Centre for Financial Studies (ACFS), formerly the Melbourne Centre for Financial Studies,
is a not-for-profit consortium of Monash University, RMIT University, the University of Melbourne and
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About Mercer
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Argentina Malaysia
Australia Mexico
Austria Netherlands
Brazil Norway
Canada Philippines
Chile Poland
China Portugal
Colombia Singapore
Denmark Spain
Finland Sweden
Italy Venezuela
Japan
RET12235_Global Pension Index brochureCOVERS _18Oct10 11:26AM