Pension system needs improvement: Mercer

Pension system needs improvement: Mercer

SINGAPORE'S pension system could do with more contribution from employers and individuals, a study on pension systems suggested after the country came in at the lower end of its rankings.

Singapore came in 13th out of 18 countries surveyed for the 2012 Mercer Global Pension Index. It scored 54.8 overall, compared with 82.9 for Denmark, which took first place, while India with 42.4 stood in last place.

On a letter grade level, Singapore scored a 'C', which makes it a system "that has some good features, but also has major risks or shortcomings that should be addressed". Denmark scored an 'A' by comparison.

"Many of the world's retirement systems are under increasing stress with an ageing population, low investment returns and, in some cases, significant government debt," senior partner at Mercer and author of the report, David Knox, said.

"Reform is needed to ensure that adequate benefits are provided over the long term in a sustainable manner."

Singapore did poorly in areas of providing sufficient retirement income and ensuring the long-term sustainability of the current retirement income system, but it did well when it came to consumer protection and communication.

For example, Singapore's low replacement rate for its workers and "virtually zero" exposure to growth assets threaten the immediate adequacy of retirement incomes. Also troubling were long term trends such as the low total fertility rate (TFR) and a low coverage rate from private pensions.

But Singapore was commended for actions like its strong supervision of private pension plans and the government's ability to enact sound policies.

There are four ways the report said Singapore can improve its overall score.

They are: getting more older workers into the workforce; increasing the percentage of contributions to be saved for investment; raising the level of social assistance available to the poorest elderly; and enacting policies that encourage non-residents to save for retirement.

There are already encouraging signs on the horizon, Mark Juneau, Asean business leader for Mercer's retirement, risk and finance business, said. Employers are becoming more keen to implement programmes that supplement the Central Provident Fund (CPF) such as Section 5 plans and Supplemental Retirement Schemes.

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