The study of 43 retirement income systems across the globe, which measures each retirement system through three weighted sub-indices (adequacy, sustainability and integrity) includes four new systems — Iceland, Taiwan, UAE and Uruguay.
Of the three sub-indices measured in the 2021 Global Pension Index, Malaysia saw an improvement in its adequacy score to 50.6 this year. The country scored highest for integrity (76.8), followed by sustainability (57.5) and adequacy, it said.
Malaysia is ranked 15th for the sustainability sub-index, which measures the likelihood of the system’s ability to provide benefits in the future; 20th for integrity, where factors which affect the citizens’ confidence in the retirement system are considered; and 34th for adequacy, which considers how the country’s system is designed to provide adequate retirement benefits, a statement on the study said today.
Janet Li, Mercer’s Wealth Business Leader for Asia, said: “It is encouraging that Malaysia continued to achieve scores that were well above the Asia average in each of the three sub-indices. As life expectancy continues to rise, the government can look at ways to increase the minimum level of support for the poorest retirees as well as the labour force participation rate, especially at older ages.”
“If Malaysia can also raise the level of household savings and lower the level of household debt, it will help boost both the adequacy and sustainability scores, and eventually the overall index value for its retirement system.”
Malaysia went from a C+ rating to a C grade this year, connoting a pension system that has some good features, but also major risks or shortcomings that should be addressed. The Malaysian system achieved the same grade as a number of other Asian economies like China, Indonesia and Taiwan.
The 2021 Global Pension Index also found that Asia’s retirement systems continue to lag the world’s. Asia’s overall index value average was 52.2, against a global average of 61.
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