Sweden
Stockholm, 15 October 2009

 

Sweden’s retirement income system has ranked third in a world first global pension index that compares private and public pension systems from around the world and ranks them based on adequacy, sustainability, and integrity.

 

The inaugural Melbourne Mercer Global Pension Index, released today, compares the retirement income systems of 11 countries, across five continents.

 

The Index, produced by Mercer, is the first time that the world’s retirement income systems - some of which are held up as best practice - have been compared and ranked on a basis that considers a retirement income system in its entirety.

 

With an ageing population on the agenda as a critical issue for governments around the world, this index can provide lessons and better insight into how countries are grappling with the related economic and social issues, according to Mercer.

 

The Netherlands obtained top ranking in the Melbourne Mercer Global Pension Index with a score of 76.1 out of a maximum of 100, followed by Australia (74.0), Sweden (73.5) and Canada (73.2).

 

Carl Westlund, Business Leader in Mercer’s Retirement, Risk and Finance Consulting business, said that the level of coverage of private pension plans, the level of pension assets and the projected demographic factors meant Sweden’s system was ranked as the most sustainable.

 

However, the report recommended that Sweden’s system could be improved by:

 

• announcing an increase in the state pension age to reflect increasing life expectancy
• improving the requirements in respect of the annual information provided to plan members

 

"What really sets Sweden apart from many countries is the high prevalence of occupational pension schemes. Almost all Swedish employees are covered by an occupational scheme, and these provide a high level of complementary benefit to the state plan," Mr Westlund said.

 

No country in the Melbourne Mercer Global Pension Index was classed as having an A-grade system (obtaining a score greater than 80), proving even the world’s most advanced pension and superannuation models still need refinement to ensure they are robust enough to support the world’s rapidly ageing population.

 

The countries with the lowest ranking retirement income systems were Japan with a score of 41.5, China (48.0) and Germany (48.2). While these countries don’t fall into the lowest grade E category, which corresponds to a score below 35, the efficacy and sustainability of their systems will be in doubt if major weaknesses are not addressed.

 

Dr David Knox, Worldwide Partner in Mercer’s Retirement, Risk and Finance Consulting business, who oversaw the study, said that global results indicated a need to address common challenges.

 

“The fact that no country achieved an A-Grade classification confirms that no one system is perfect or currently robust enough to withstand the challenges presented by an ageing population,” Dr Knox said.

 

“The best arrangements for a particular country will depend upon its individual social, economic, political, cultural and historical context.  However, by examining common and desirable characteristics of a retirement income system, lessons can be learned by governments to help them better prepare for demographic change and ensure older citizens have access to adequate incomes in retirement,” he said.

 

The overall index considers results from more than forty indicators which reflect certain features that are desirable in all retirement income systems. These characteristics have been grouped into adequacy, sustainability and integrity.

 

The adequacy of benefits – or how much income is available to a retiree – was given the highest rating in the index. The Netherlands (80.5) and Canada (76.2) scored highest in this index due to the level of minimum public pension and a relatively high net replacement rate of income for median income earners. Sweden was in third position for this sub-index with a score of 68.5. Japan had the lowest score at 39.2.

 

Participation in private pension plans and the level of pensions assets (expressed as a % of GDP) were the two major factors in the sustainability sub-index. Sweden (75.2) and Australia (71.0) rated the highest on this sub-index, while Japan (34.4) and China (38.5) scored the lowest.

 

The Melbourne Mercer Global Pension Index also took into consideration the integrity of the private pension provisions which is important in maintaining the community’s confidence in the system. Based on an assessment of four key areas – prudential regulation, governance, risk protection and communication – the highest rating countries for the integrity sub-index were the Netherlands (88.2), Australia (87.8) and the UK (86.3). Sweden ranked sixth with a score of 79.1.

 

It is hoped that the Melbourne Mercer Global Pension index will be repeated annually and that the future studies will be expanded to include more countries. The report is expected to generate strong interest internationally, including with organisations such as the World Bank and OECD.

 

Melbourne Mercer Global Pension Index 2009

 

The following table shows the overall index value for each country, together with the index value for each of the three sub-indices; namely adequacy, sustainability and integrity.  Each index value represents a score between 0 and 100.

 

 

Country	Overall index value	Sub-index values
		Adequacy Weighting 40%	Sustainability Weighting 35%	Integrity Weighting 25%
Netherlands	76.1	80.5	62.5	88.2
Australia	74.0	68.1	71.0	87.8
Sweden	73.5	68.5	75.2	79.1
Canada	73.2	76.2	64.2	80.9
UK	63.9	56.6	56.4	86.3
USA	59.8	49.2	69.4	63.4
Chile	59.6	48.9	54.1	84.5
Singapore	57.0	51.7	68.9	49.1
Germany	48.2	60.8	44.3	33.7
China	48.0	64.7	38.5	34.7
Japan	41.5	39.2	34.4	55.2
Average	61.4	60.4	58.1	67.5

 

 

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges.

 

 

 

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