Singapore slips in global ranking of retirement savings systems

SINGAPORE may have held on to its pole position among Asian countries for a third consecutive year, but its retirement savings system has been downgraded in the 2015 Melbourne Mercer Global Pension Index.

In terms of index value, the Republic's retirement savings system has slipped from a 'B' grade to 'C+'.

The downgrade is attributable to a change in calculation, which reduced the level of pension assets as a percentage of gross domestic product for Singapore, or the amount of money set aside for retirement.

Other contributing factors - most recent data from the Economic Intelligence Unit showed a decrease in the net household savings rate for Singapore, and the United Nations' updated life expectancy figures in its World Population Prospects: The 2015 Revision report, showed a continued decline in mortality rates here.

The index showed that Singapore's overall score fell from 65.9 in 2014 to 64.7 in 2015, moving it further away from an 'A' grade, which is given to pension systems that score above 80.

Denmark and the Netherlands are the only countries to achieve an 'A' grade in the history of the index, which is into its seventh year.

For the fourth straight year, Denmark held on to the top position in 2015 with an overall score of 81.7.

"Denmark's well-funded pension system with its good coverage, high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations are the primary reasons for its top spot," said the index.

Neil Narale, Asia retirement leader for Mercer, said despite the poor global showing, Singapore is on the right track having announced improvements to the Central Provident Fund (CPF) in 2016, including increasing the wage limit, contributions and guaranteed investment returns for older members and introduction of the Silver Support Scheme to help low income retirees.

The index suggested measures to improve Singapore's system including reducing barriers to establishing tax-approved group corporate retirement plans; opening CPF to non-residents (who comprise more than one-third of the labour force); and increasing the labour force participation rate among older workers.

The index, published by the Australian Centre for Financial Studies together with Mercer and is funded by the Victorian State Government, measured 25 retirement income systems against more than 40 indicators under the sub-indices of adequacy, sustainability and integrity.

It covers close to 60 per cent of the world's population and suggests how governments can provide adequate and sustainable benefits that protect their citizens against longevity risk, the risk of their ageing population outliving their savings, potentially one of the biggest economic and social risks facing many retirees today.