Global Pension Index 2021: India’s pension system needs impetus to ensure adequate retirement income


  • The Mercer CFA Institute Global Pension Index compares 43 retirement income systems, and compares each system with respect of adequacy, sustainability and integrity.
  • India ranks 40th on overall index ranking out of 43 systems

Mumbai, October 19, 2021: India needs to undertake strategic reforms to revamp the pension system so as to ensure adequate retirement income, revealed the 2021 Mercer CFA Global Pension Index survey (MCGPI) released today. The Indian pension system ranked 40th on overall index ranking out of 43 systems, and had the lowest rank in the adequacy sub-index.

 

The primary objective of this annual survey by Mercer Consulting, a leading global management consulting firm, is to benchmark each retirement income system using more than 50 indicators.

 

This year’s index edition added four new retirement systems – Iceland, Taiwan, UAE and Uruguay. In its first appearance in the Index, Iceland overthrew the Netherlands to receive the highest overall index value of 84.2. Thailand had the lowest overall index value at 40.6.

 

According to the survey, India had an overall index value of 43.3 among the countries analysed. The index highlights key strengths of retirement pension systems around three sub-indexes - adequacy, sustainability and integrity, where India scored 33.5, 41.8 and 61.0 respectively. The adequacy sub-index represents the adequacy of the benefits that are being provided, the sustainability sub-index represents the likelihood that the current system is able to provide benefits in the future, while the integrity sub-index includes many legislative requirements that influence the overall governance and operations of the system which affect the level of confidence that citizens have in their system.

 

With little social security coverage in the country, the workforce in India has to manage pension savings on its own for the most part.  The coverage under private pension arrangement is just about 6% in India. With over 90% of the total workforce being in the unorganised sector, measures should be taken to get a larger workforce under pension savings.  This would go a long way in improving the adequacy sub index. 

 

According to Preeti Chandrashekhar, India Business Leader at Mercer – Health and Wealth: “The Indian pension system is at an inflection point, especially as the longer-term effects of the COVID-19 pandemic have not yet played out fully on the economy. Healthy pension systems contribute positively towards creating a stable and prosperous economy, as reported by the World Bank. While the Government has already launched schemes as part of universal social security program aimed at benefiting the unorganised sector, and the National Pension System is gradually gaining popularity, radical and strategic reforms are needed to ensure adequacy and sustainability of social security for each and every Indian. With the rules under new Social Security Code that covers unorganised, gig and platform workers expected to be notified soon, one should see significant improvement on this front in the medium to long term.”

 

The report also underlines areas of improvement for the pension system surveyed. In India, the report suggests introducing a minimum level of support for the poorest aged individuals and increasing coverage of pension arrangements for the unorganised working class for bettering the adequacy index. Introducing a minimum access age so that it is clear that benefits are preserved for retirement purposes is likely to go a long way in improving the sustainability index and the integrity index could be further elevated by refining the regulatory requirements for the private pension system

 

Shamit Chokshi, CFA Society India’s Research & Advocacy Committee member, said, “India’s policy landscape for retirement benefits continues to evolve, with an intent to improve take rates in the private sector. Yet, the overall coverage through pension is low due to minimal long-term public pension spending, low investment in NPS due to the absence of co-contribution, a lack of education and awareness, and different benefits and withdrawal terms compared to the state managed pension fund. With these concerns in mind, the promise of a secure retirement depends on policymakers and industry stakeholders taking collective action to examine the strengths and weaknesses of pension systems, with the purpose of delivering better retirement benefits to every individual.”  

 

For more information about the Mercer CFA Institute Global Pension Index, click here.

2021 Mercer CFA Institute Global Pension Index

System

Overall index value

Sub-index values

Adequacy

Sustainability

Integrity

 Argentina (42)

41.5

52.7

27.7

43.0

 Australia (6)

75.0

67.4

75.7

86.3

 Austria (33)

53.0

65.3

23.5

74.5

 Belgium (17)

64.5

74.9

36.3

87.4

 Brazil (30)

54.7

71.2

24.1

71.2

 Canada (12)

69.8

69.0

65.7

76.7

 Chile (16)

67.0

57.6

68.8

79.3

 China (28)

55.1

62.6

43.5

59.4

 Colombia (25)

58.4

62.0

46.2

69.8

 Denmark (3)

82.0

81.1

83.5

81.4

 Finland (7)

73.3

71.4

61.5

93.1

 France (21)

60.5

79.1

41.8

56.8

 Germany (14)

67.9

79.3

45.4

81.2

 Hong Kong SAR (18)

61.8

55.1

51.1

87.7

 Iceland (1)

84.2

82.7

84.6

86.0

 India (40)

43.3

33.5

41.8

61.0

 Indonesia (35)

50.4

44.7

43.6

69.2

 Ireland (13)

68.3

78.0

47.4

82.1

 Israel (4)

77.1

73.6

76.1

83.9

 Italy (32)

53.4

68.2

21.3

74.9

 Japan (36)

49.8

52.9

37.5

61.9

 Korea (38)

48.3

43.4

52.7

50.0

 Malaysia (23)

59.6

50.6

57.5

76.8

 Mexico (37)

49.0

47.3

54.7

43.8

 Netherlands (2)

83.5

82.3

81.6

87.9

 New Zealand (15)

67.4

61.8

62.5

83.2

 Norway (5)

75.2

81.2

57.4

90.2

 Peru (29)

55.0

58.8

44.2

64.1

 Philippines (41)

42.7

38.9

52.5

35.0

 Poland (27)

55.2

60.9

41.3

65.6

 Saudi Arabia (26)

58.1

61.7

50.9

62.5

 Singapore (10)

70.7

73.5

59.8

81.5

 South Africa (31)

53.6

44.3

46.5

78.5

 Spain (24)

58.6

72.9

28.1

78.3

 Sweden (8)

72.9

67.8

73.7

80.0

 Switzerland (11)

70.0

65.4

67.2

81.3

 Taiwan (34)

51.8

40.8

51.9

69.3

 Thailand (43)

40.6

35.2

40.0

50.0

 Turkey (39)

45.8

47.7

28.6

66.7

 UAE (22)

59.6

59.7

50.2

72.6

 UK (9)

71.6

73.9

59.8

84.4

 Uruguay (20)

60.7

62.1

49.2

74.4

 USA (19)

61.4

60.9

63.6

59.2

Average

61.0

62.2

51.7

72.1

 


About the Mercer CFA Institute Global Pension Index

The Global Pension Index benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.

 

The Global Pension Index is a collaborative research project sponsored by CFA Institute, the global association of investment professionals, in collaboration with the Monash Centre for Financial Studies (MCFS), part of Monash Business School at Monash University, and Mercer, a global leader in redefining the world of work and reshaping retirement and investment outcomes.

 

This year, the Global Pension Index compares 43 retirement income systems across the globe and covers two-thirds (65 per cent) of the world’s population. The 2021 Global Pension Index includes four new systems – Iceland, Taiwan, UAE and Uruguay.

 

The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against more than 50 indicators.

 

For more information about the Mercer CFA Institute Global Pension Index, click here.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 78,000 colleagues and annual revenue of over $18 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

About CFA Institute 

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 175,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide and there are 160 local societies. For more information, visit www.cfainstitute.org or follow us on Linkedin and Twitter at @CFAInstitute

About the Monash Centre for Financial Studies (MCFS)

A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption. 

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