1、Mercer CFA Institute Global Pension Index 2022Converting defined contribution benefits into better outcomes for retireesContentsMercer CFA Institute Global Pension Index 2022201Executive summary02Background to the Index03An overview of the changes for 202205A brief review of each system07The sustain

2、ability sub-index08The integrity sub-index06The adequacysub-indexFeature chapter04Converting defined contribution benefits into better outcomes for retireesMercer preface CFA Institute prefaceReferences and appendicesMercer prefacePension plans are facing challenges not seen in the global economy in

3、 decades as they feel the effects of the pandemic,global conflicts,supply chain disruptions and a reversal of the trend toward globalization.These developments have brought higher levels of inflation,rising interest rates and greater uncertainty in economic conditions,while life expectancies continu

4、e to rise and populations age.All these pressures are occurring at a time when individuals are taking on more responsibility as the prevalence of defined contribution(DC)arrangements continue to increase around the world.Whether it is public pension plans with their reliance on government finances o

5、r private pension plans invested in the financial markets,questions are being asked about whether the retirement income systems in many countries will be able to meet the expectations of their communities in the decades ahead.Planning for the long term is therefore more critical than ever.The Mercer

6、 CFA Institute Global Pension Index 2022 compares 44 retirement income systems and compares each system in terms of adequacy,sustainability and integrity.Or to put it another way:What benefits are future retirees likely to receive?Can the existing systems continue to deliver,notwithstanding the demo

7、graphic and financial challenges?Are the private pensions plans regulated in a manner that encourages long-term community confidence?Some existing pension arrangements are either providing very limited benefits or may not be sustainable over the longer term.There are lessons to be learned.The primar

8、y objective of this research is to benchmark each retirement income system using more than 50 indicators.An important secondary purpose is to highlight some shortcomings in each system and suggest possible areas of reform that would provide more adequate retirement benefits,increased sustainability

9、and greater community trust in the pension system.Mercer CFA Institute Global Pension Index 20223Many of the challenges are similar around the world,irrespective of social,political,historical or economic influences.The policy reforms needed to respond to these challenges are also similar.They relat

10、e to:Benefit levels and equity across various income levels Coverage of private pension plans Retirement ages The need to encourage people to work a little longer Increasing the level of funding set aside for retirement Benefit design to reduce leakage before retirement The development of appropriat

11、e retirement income products,particularly with the growing importance of DC arrangements.However,these necessary reforms are not always straightforward,and some may require long transition periods.This years report tackles one of these reforms in detail;that is,how to convert a DC pension pot into b

12、etter outcomes for retirees.The answer is not straightforward,as the needs of individual retirees vary considerably with differing social security arrangements and cultural expectations around the world.Neither an indexed lifetime pension nor a lump sum to spend may represent the best solution.The a

13、nswer is more complicated than that,and I look forward to the discussion responding to our suggested principles in Chapter 4.I am delighted to recognize the CFA Institute as our major sponsor and sincerely thank the CFA team for their enthusiasm and participation.The Index is a real partnership betw

14、een two respected global organizations.I would also like to thank our advisory board,established by the Monash Centre for Financial Studies,for its continued involvement and insights during the thorough review of the Index completed in early 2022.Chapter 3 outlines the results of this review.Finally

15、,I am very grateful to the Mercer consultants around the world who have been invaluable in providing information about their retirement income systems and checking our interpretation of the data.We also appreciate the support of the Finnish Centre for Pensions and the Icelandic Pension Funds Associa

16、tion.We hope you enjoy reading this report and that it continues to encourage pension reform to improve the provision of financial security for all retirees.Dr David KnoxLead author and Senior Partner,MercerMercer CFA Institute Global Pension Index 20224CFA Institute prefaceCFA Institute is honored

17、to collaborate with Mercer and the Monash Centre for Financial Studies to release this years edition of the Mercer CFA Institute Global Pension Index.At CFA Institute,our mission is to lead the investment profession globally by promoting the highest standards of ethics,education,and professional exc

18、ellence for the ultimate benefit of society.In particular,the closing words “the ultimate benefit of society”speak directly to our desire to increase the positive real-world impact of investment management.Retirement systems that meet the adequacy,sustainability,and integrity standards of the index

19、contribute to the health of the financial system.We at CFA Institute seek to shape the future of the investment industry and the profession,which includes advocating for the structural resilience of capital markets.Pension systems and retirement plans are important building blocks of market resilien

20、ce across the globe.Pension plans face extraordinary challenges,and new financial products and strategies will be required to address these concerns and deliver adequate returns for end beneficiaries.We must,as investment professionals,lead the effort for greater retirement security for individuals.

21、We must work together with public authorities to evaluate the status of pension plans in their jurisdictions,challenge the status quo where necessary,and rebuild trust in pensions across the globe through the betterment of these systems.This years report includes a special chapter on one of the most

22、 important and complex topics surrounding pensions:how to structure retirement income streams that enable financial well-being over a retirees lifespan.In the last several decades,the shift of pension liabilities from employers to individuals has changed the retirement landscape.Meanwhile,government

23、s are increasingly facing constraints on benefits they can pay.This creates a great responsibility for individuals and households to navigate a complex financial challenge,often with very little financial education.The investment industry will have an important role to play in educating investors an

24、d developing new products to help manage longevity risk.At CFA Institute,we believe financial professionals can truly serve as a force for good in society supporting individuals through this complex time is just one example of this in action.Analysis and understanding of data and trends,and informed

25、 recommendations based upon those findings,will shape how the leaders of each pension system included in the index can improve the effectiveness and sustainability of their individual system.This information will foster important dialogue about how pension systems compare and ways to implement findi

26、ngs from one pension system to improve another.We extend our thanks to Dr.David Knox of Mercer and the entire Mercer team who have dedicated time and resources to this important research,as well as the Monash Centre for Financial Studies for their oversight,which ensures the integrity of the Index e

27、ach year.Pension fund reform continues to be a pressing societal challenge,and we are confident that the Mercer CFA Institute Global Pension Index will foster meaningful conversation and action in this area around the world.Margaret Franklin,CFA President and CEO,CFA InstituteMercer CFA Institute Gl

28、obal Pension Index 20225Mercer CFA Institute Global Pension Index 202261 World Economic Forum,2022.01.Executive summaryThe provision of financial security in retirement is critical for both individuals and societies as most countries now grapple with the social,economic and financial effects of agin

29、g populations.As the World Economic Forum(the Forum)notes,“For the first time in human history,people aged 65 and over outnumber children aged five or younger.”12 World Economic Forum.Platform Advisory Process 2022 23,2022.3 OECD.Pensions at a Glance 2021:Methodology,available at www.oecd.org/public

30、ations/oecd-pensions-at-a-glance-19991363.htm 01.Executive summary|Since 2020,many of these issues have been accentuated by the COVID-19 pandemic.But it is not only aging populations and the effects of the coronavirus that represent challenges for pension systems around the world.The current economi

31、c environment of reduced wage growth,rising inflation and reduced investment returns in many asset classes is placing additional financial pressures on retirement income systems.Now more than ever before,we need to understand the features of the leading pension systems.The Forum notes,“Current retir

32、ement and pension systems are not prepared for the reality of unprecedented longevity.Governments and the public sector are also falling behind in offering tangible policies and programs that can assist an aging population.”2Within this context of uncertainties and long-term challenges,a comparison

33、of the different pension systems around the world can be really valuable for policymakers,governments and the pension industry itself.Yet such a comparison is not straightforward.As the OECD comments,“Retirement-income regimes are diverse and often involve a number of different programs.”3 Any compa

34、rative ranking of systems is likely to be controversial,as each system has evolved from particular economic,social,cultural,political and historical circumstances.This means no single system can be transplanted from one country and applied,without change,to another country.However,certain features a

35、nd characteristics across the range of systems are likely to lead to improved financial benefits for the older members of society,an increased likelihood of future sustainability of the system,and a greater level of community trust and confidence.With these desirable outcomes in mind,the Mercer CFA

36、Institute Global Pension Index(the Index)uses three sub-indices adequacy,sustainability and integrity to measure each retirement income system against more than 50 indicators.Figure 1 highlights some of the topics covered in each sub-index.Figure 1.Calculating the Mercer CFA Institute Global Pension

37、 Index40%Mercer CFA Institute Global Pension IndexIndicatorsincludingSub-index35%25%Benefits System design Savings Government support Home ownership Growth assets Pension coverage Total assets Demography Public expenditure Government debt Economic growth Regulation Governance Protection Communicatio

38、n Operating costsAdequacySustainabilityIntegrityMercer CFA Institute Global Pension Index 20227*In this report,“China”refers to the pension system in mainland China.The pension systems in Hong Kong SAR and Taiwan are shown separately,as they have different pension systems.01.Executive summary|The ov

39、erall index value for each system represents the weighted average of the three sub-indices.The weightings used are 40%for the adequacy sub-index,35%for the sustainability sub-index and 25%for the integrity sub-index.These weightings have remained unchanged since the first Index was published in 2009

40、.The different weightings reflect the primary importance of the adequacy sub-index,which represents the benefits provided,together with some important system design features.The sustainability sub-index has a focus on the future and uses various indicators that will influence the likelihood that the

41、 current system will be able to provide benefits in the future.The integrity sub-index includes many legislative requirements that influence the overall governance and operations of the system,which affect the level of confidence the citizens of each country have in their system.With the addition of

42、 Portugal in 2022,this study now includes 44 retirement income systems,representing 65%of the worlds population.It demonstrates great diversity between the systems around the world,with index values ranging from 41.7 for Thailand to 84.7 for Iceland.GradeIndex valueSystemsDescriptionA80IcelandNether

43、landsDenmarkA first-class and robust retirement income system that delivers good benefits,is sustainable and has a high level of integrityB+7580IsraelFinlandAustraliaNorwayA system that has a sound structure,with many good features,but has some areas for improvement that differentiates it from an A-

44、grade systemB6575SwedenSingaporeUKSwitzerlandUruguayCanada Ireland New Zealand ChileBelgiumGermanyC+6065Hong Kong SARUSColombiaFranceMalaysia PortugalSpainUAEA system that has some good features,but also has major risks and/or shortcomings that should be addressed;without these improvements,its effi

45、cacy and/or long-term sustainability can be questionedC5060Saudi ArabiaPolandMexicoBrazilPeru ItalyAustriaSouth AfricaChina*JapanTaiwanKorea(South)D3550IndonesiaTurkeyIndiaArgentinaPhilippinesThailandA system that has some desirable features,but also has major weaknesses and/or omissions that need t

46、o be addressed;without these improvements,its efficacy and sustainability are in doubtE35NilA poor system that may be in the early stages of development or non-existentFigure 2.Summary of the 2022 resultsMercer CFA Institute Global Pension Index 2022801.Executive summary|This study shows that Icelan

47、d,the Netherlands and Denmark have the best systems,with each of them receiving an A-grade in 2022.No system in this years Index has an E-grade system,which would be represented by an index value below 35.A score between 35 and 50,representing a D-grade system,indicates a system that has some sound

48、features but also major omissions or weaknesses.A D-grade classification may also be conferred in the relatively early stages of the development of a particular retirement income system.Figure 3 shows the overall index value for each system,together with the index value for each of the three sub-ind

49、ices.Each index value represents a score between 0 and 100.Figure 3.Overall index value for each system,including the three sub-indicesSystemOverall index valueSub-index valuesAdequacySustainabilityIntegrity Argentina 43.355.629.442.9 Australia 76.870.277.286.8 Austria 55.069.822.776.5 Belgium 67.98

50、0.839.187.5 Brazil 55.871.127.870.5 Canada 70.670.864.778.6 Chile 68.360.070.378.9 China54.564.439.360.0 Colombia 63.265.255.371.3 Denmark 82.081.482.582.1 Finland 77.277.565.393.3 France 63.284.640.960.1Mercer CFA Institute Global Pension Index 2022901.Executive summary|SystemOverall index valueSub

51、-index valuesAdequacySustainabilityIntegrity Germany67.980.544.380.9 Hong Kong SAR 64.761.552.187.6 Iceland84.785.883.884.4 India 44.437.640.760.4 Indonesia 49.239.344.571.5 Ireland 70.075.953.583.7 Israel 79.875.781.983.2 Italy 55.772.323.174.7 Japan 54.558.044.563.0 Korea(South)51.140.154.963.5 Ma

52、laysia 63.157.260.276.9 Mexico 56.163.157.143.6 Netherlands 84.684.981.987.8 New Zealand 68.864.064.782.1 Norway 75.379.060.490.3 Peru 55.854.751.563.7 Philippines 42.040.552.330.0 Poland 57.559.545.471.2 Portugal62.884.929.773.9 Saudi Arabia 59.261.454.362.5 Singapore 74.177.365.481.0Mercer CFA Ins

53、titute Global Pension Index 20221001.Executive summary|SystemOverall index valueSub-index valuesAdequacySustainabilityIntegrity South Africa 54.744.249.778.4 Spain 61.880.028.778.9 Sweden 74.670.675.779.5 Switzerland 72.368.770.580.7 Taiwan52.942.053.269.8 Thailand 41.741.336.450.0 Turkey 45.345.629

54、.866.6 UAE61.863.851.972.6 UK 73.776.563.983.0 Uruguay71.584.550.679.8 US63.967.561.261.7Average63.065.753.072.9Each overall index value takes into account more than 50 indicators,some of which are based on data measurements that can be difficult to compare between countries.For this reason,we shoul

55、d not be too definite that one system is better than another when the difference in the overall index value is less than two or three points.On the other hand,when the difference is five or more,we can fairly conclude that the higher index value indicates a better retirement income system.Mercer CFA

56、 Institute Global Pension Index 20221101.Executive summary|Figure 4 shows the grade for each systems sub-index values as well as the overall grade.This approach highlights the fact that some systems have a weakness in one area(for example,sustainability)while being much stronger in the other two are

57、as.Such a weakness highlights areas for future reforms.Figure 4.Overall index grades for each system,including the three sub-indicesSystemOverall index valueSub-index gradesAdequacySustainabilityIntegrity Argentina DCED Australia B+BB+A Austria CBEB+Belgium BADA Brazil CBEB Canada BBC+B+Chile BC+BB+

58、China CC+DC+Colombia C+BCB Denmark AAAA Finland B+B+BA France C+ADC+Germany BADA Hong Kong SAR C+C+CA Iceland AAAA India DDDC+Mercer CFA Institute Global Pension Index 20221201.Executive summary|SystemOverall index valueSub-index gradesAdequacySustainabilityIntegrity Indonesia DDDB Ireland BB+CA Isr

59、ael B+B+AA Italy CBEB Japan CCDC+Korea(South)CDCC+Malaysia C+CC+B+Mexico CC+CD Netherlands AAAA New Zealand BC+C+A Norway B+B+C+A Peru CCCC+Philippines DDCE Poland CCDB PortugalC+AEB Saudi Arabia CC+CC+Singapore BB+BA South Africa CDDB+Spain C+AEB+Sweden BBB+B+Mercer CFA Institute Global Pension Ind

60、ex 20221301.Executive summary|SystemOverall index valueSub-index gradesAdequacySustainabilityIntegrity Switzerland BBBA Taiwan CDCB Thailand DDDC Turkey DDEB UAE C+C+CB UK BB+C+A Uruguay BACB+USC+BC+C+Mercer CFA Institute Global Pension Index 2022144 van Popta B,Steenbeek O.“Transition to a new pens

61、ion contract in the Netherlands:Lessons from abroad,”Netspar Occasional Paper 3/21,2021.5 Australian Government,the Treasury.Retirement Income Review Final Report,2020.6 Several countries have moved in this direction in recent years.Nevertheless,very few are linking the future pension age to the lik

62、ely ongoing increases in life expectancy.01.Executive summary|Overall recommendationsChapter 5 makes several suggestions to improve each retirement income system.Although each system reflects a unique history,we see some common themes for improvement,as many systems face similar problems in the deca

63、des ahead.Significant pension reform is never easy,but an important starting point is to express the objectives of the overall system.As van Popta and Steenbeek note,“The objective of pension reform must be crystal clear and the perspectives of all stakeholders consumers,employers,government,industr

64、y must be addressed.”4 A recent review into Australias retirement income system commented,“An agreed objective is needed to anchor the direction of policy settings,help ensure the purpose of the system is understood,and provide a framework for assessing the performance of the system.”5 The 2017 Worl

65、d Economic Forum has highlighted three key areas that will have the biggest impact on the overall level of financial security in retirement.These were to:Provide a“safety net”pension for all Improve ease of access to well-managed,cost-effective retirement plans Support initiatives to increase contri

66、bution ratesEach of these factors is critical,and each has been highlighted within the adequacy or sustainability sub-indices.A range of reforms continues to be implemented to improve long-term outcomes from our retirement income systems,including:Increasing the coverage of employees(including non-s

67、tandard workers)and the self-employed in the private pension system,recognizing that many individuals will not save for the future without an element of compulsion or auto-enrollment.Increasing the state pension age and/or retirement age to reflect increasing life expectancy,both now and into the fu

68、ture,thereby reducing the costs of publicly financed pension benefits.6 Promoting higher labor force participation at older ages,which will increase the savings available for retirement and limit the continuing increase in the length of retirement.Encouraging higher levels of private saving,both wit

69、hin and beyond the pension system,to reduce the future dependence on the public pension while also adjusting the expectations of many workers.Introducing measures to reduce the gender pension gap and those that exist for minority groups in many retirement income systems.Reducing leakage from the ret

70、irement savings system prior to retirement,thereby ensuring that the funds saved,often with associated taxation support,are used for the provision of retirement income.Improving the governance of private pension plans and introducing greater transparency to improve the confidence of plan members.Mer

71、cer CFA Institute Global Pension Index 20221502.Background to the IndexThe structure and characteristics of pension systems around the world exhibit great diversity,with a wide range of features and norms.Comparisons are not straightforward.In addition,the lack of readily available and comparable da

72、ta for many systems provides additional challenges for such a comparison.Therefore,this report uses a variety of data sources,drawing on publicly available data whenever possible.Mercer CFA Institute Global Pension Index 20221602.Background to the Index|Mercer CFA Institute Global Pension Index 2022

73、177 World Bank.Averting the old age crisis,Washington:World Bank,1994.8 World Bank.The World Bank Pension Conceptual Framework,2008.These challenges of data and benchmarking should not,however,prevent the comparison of retirement income systems.Within the context of aging populations and current eco

74、nomic conditions,it is too important a consideration to ignore.Furthermore,programs,policies and practices adopted in some retirement income systems provide valuable lessons,experience or ideas for the development or reform of other systems.This edition of the Index compares 44 retirement income sys

75、tems,highlighting both the considerable diversity and positive features of many systems.Notwithstanding these highlights,the study also confirms that no pension system is perfect and every system has some shortcomings.In Chapter 5,we make suggestions for improving the efficacy of each retirement inc

76、ome system.We hope this study will act as a stimulus for governments and policymakers around the world to review retirement income systems to improve outcomes for future retirees.In its influential publication Averting the old age crisis,7 the World Bank recommended a multi-pillar system for the pro

77、vision of old-age income security,comprising:Pillar 1:A mandatory,publicly managed tax-financed public pension Pillar 2:Mandatory,privately managed,fully funded benefits Pillar 3:Voluntary,privately managed,fully funded personal savingsSubsequently,in the World Bank Pension Conceptual Framework,8 th

78、e three-pillar system was extended to the following five-pillar approach:Zero pillar:A non-contributory basic pension from public finances to deal explicitly with the poverty-alleviation objective First pillar:A mandated public pension plan with contributions linked to earnings,with the objective of

79、 replacing some pre-retirement income Second pillar:Typically,mandated defined contribution(DC)with individual accounts in occupational or personal pension plans with financial assets Third pillar:Voluntary and fully funded occupational or personal pension plans with financial assets that can provid

80、e some flexibility when compared to mandatory schemes Fourth pillar:A voluntary system outside the pension system with access to a range of financial and non-financial assets and informal support such as family,healthcare and housingThe World Bank notes that multi-pillar designs provide more flexibi

81、lity than single pillars in meeting the core objectives of pension systems;namely,protection against the risk of poverty in old age and smoothing some consumption from ones work life into retirement.9 International Labour Organization(2018),The ILO Multi-Pillar pension model:Building equitable and s

82、ustainable pension systems,p3.10 OECD.Pensions at a Glance 2017.11 Centre for Excellence in Population Ageing Research.Retirement income in Australia:Part I-Overview,CEPAR Research Brief,November,2018.02.Background to the Index|Figure 5.The World Bank Pension Conceptual Framework A basic public pens

83、ion that provides a minimal level of protectionA public,mandatory and contributory system linked to earningsA private,mandatory and fully funded systemA voluntary and fully funded systemPillar 0Pillar 1Pillar 2Pillar 3Financial and non-financial support outside formal pension arangementsPillar 4In e

84、ffect,the original first pillar was split into the poverty-alleviation zero pillar and a mandatory first pillar.A new fourth pillar was added that includes access to non-pension assets and informal support.This five-pillar approach provides a good basis for comparing retirement income systems around

85、 the world.Hence,the range of indicators used in this report considers features or results associated with each pillar.The International Labour Organization also supports the concept of a multi-pillar pension system noting,“the possibility of combining a set of social protection instruments,each of

86、which plays one or more functions,to guarantee the whole range of objectives of a national pension system.”9 Its four pillars are similar to pillars 03 of the World Banks framework.In contrast to the World Bank,the OECD adopts a three-tier system,10 namely:Tier 1:A universal or targeted pension Tier

87、 2:A mandatory savings system,provided by either the public or private sector Tier 3:A voluntary savings system in the private sectorThe Centre of Excellence in Population Ageing Research11 suggests the first tier is primarily a safety net designed for those unable to provide for themselves.On the o

88、ther hand,the second tier represents some consumption smoothing from ones working years to the retirement years.The third tier is voluntary and enables some households to save more than required under the mandatory system.Although this three-tier approach is helpful in understanding the different ro

89、les for each type of pension,the Index continues to include non-pension factors such as home ownership,non-pension savings and household debt,which can have a significant impact on financial security during retirement.That is,an individuals financial wellness in retirement does not depend solely on

90、their government and employment-related pensions.The“best”system for a particular country at a particular time must also consider that countrys economic,social,cultural,political and historical context.In addition,regulatory philosophies vary over time and between countries.No pension system is perf

91、ect for every country at the same time.It is not that simple.However,some characteristics of all pension systems can be tested or compared to provide a better understanding of how each system is tackling the provision of retirement income.Since its inception,the Index has grouped these desirable cha

92、racteristics into adequacy,sustainability and integrity.Mercer CFA Institute Global Pension Index 20221802.Background to the Index|AdequacyThe adequacy of benefits is perhaps the most obvious way to compare different systems.After all,the primary objective of any pension system is to provide adequat

93、e retirement income.Therefore,this sub-index considers the base(or safety-net)level of income provided by each system,as well as the net replacement rate at income levels ranging from 50%to 150%of the average wage.Critical to the delivery of adequate benefits are the design features of the private p

94、ension system(that is,the second and third pillars).Although we could assess many features,we have considered the following six broad topics,each of which represents a feature that will improve the likelihood that adequate retirement benefits are provided:Taxation support Are voluntary member contri

95、butions by an average-income earner to a funded pension plan treated more favorably by the tax system than similar savings in a bank account?Is the investment income earned by pension plans exempt from tax in the pre-retirement and/or post-retirement periods?The first question assesses whether the g

96、overnment provides any incentives to encourage average-income earners to save for retirement.The taxation treatment of pensions varies greatly around the world,so this question assesses whether or not an incentive exists,not the value of the concession.The second question recognizes that the level o

97、f investment earnings is critical,especially for DC plans.A tax on investment income reduces the compounding effect and will therefore reduce the adequacy of future benefits.Retirement benefit designIs it a requirement to take part or all of the retirement benefit as an annuity or income stream for

98、life?If so,are lump-sum benefits also available?In lump-sum-based schemes,are there any incentives or rules that encourage the taking of income streams?Many systems require lifetime annuities,whereas others provide lump-sum retirement benefits that are not necessarily converted into an income stream

99、.As discussed in Chapter 4,a flexible hybrid arrangement probably delivers the best outcome for many retirees.Preservation Is there a minimum access age to receive benefits from the private pension plans(except for death,invalidity and/or cases of significant financial hardship)?This question determ

100、ines whether the private pension system permits the undesirable leakage of accumulated benefits from the system before retirement or whether the regulations focus on the provision of benefits at and during retirement.SeparationUpon a couples divorce or separation,are the individuals accrued pension

101、assets normally taken into account in the overall division of assets?This question recognizes that the financial treatment of accrued pension assets can have a major effect on the future financial security of one or both partners following a divorce or separation.Vesting and portability On resignati

102、on from a particular employer,are plan members normally entitled to the full vesting of their accrued benefit?After resignation,is the value of the members accrued benefit normally maintained in real terms(either by inflation-linked indexation or through market-related investment returns)?Can a memb

103、ers benefit entitlements normally be transferred to another private pension plan on the members resignation from any employer?These questions focus on what happens to the individuals accrued benefit when they change employment.Traditionally,many private pension plans penalized resigning members,whic

104、h,in turn,affected the level of benefits available at retirement.Continued accrualAre individuals required to continue to accrue their retirement benefit when they receive income such as a disability pension or paid parental leave?Does the system provide any additional contributions or benefits for

105、parents who are caring for young children while the parent is not in the paid workforce?These questions recognize that the adequacy of an individuals retirement income will be affected when there is no requirement for benefits to continue to accrue when a worker is temporarily out of the workforce;f

106、or example,due to parental leave,ill health,disability or to care for young children.Mercer CFA Institute Global Pension Index 20221902.Background to the Index|In addition to these design issues,we consider savings from outside formal pension programs,highlighting the fact that,as the World Bank not

107、es,the fourth pillar can play an important role in providing financial security in retirement.These indicators cover the rate of household savings,the level of household debt and the level of home ownership.This pillar also includes access to informal family support,but the extent of this support is

108、 very difficult to measure in an objective manner.Finally,we recognize that the net investment return over the long term represents a critical factor in determining whether an adequate retirement benefit will be provided.This is particularly true given the increasing importance of DC plans.Although

109、investment and administrative costs are considered as part of the integrity sub-index,the long-term return is likely to be affected by the types and diversity of assets held by the pension fund.Therefore,the adequacy sub-index includes an indicator representing an assessment of the percentage of inv

110、estments held in growth assets(including equities and property).Mercer CFA Institute Global Pension Index 20222012 World Bank.Pensions Overview,2019.02.Background to the Index|Sustainability The long-term sustainability of the existing retirement income system is a concern in many countries,particul

111、arly in light of the aging population,the increasing old-age dependency ratio,the public expenditure on pensions,substantial government debt and rising inflation.Indeed,the World Bank has noted that“most public pension schemes are not viable financially and cannot keep their promises to younger coho

112、rts that will retire in the future.”12 This sub-index therefore brings together several measures that affect the sustainability of current programs.Although some demographic measures,such as the old-age dependency ratio(both now and in the future),are difficult to change,others such as the state pen

113、sion age,the opportunity for phased retirement and the labor force participation rate among older workers can be influenced,either directly or indirectly,by government policy.An important feature of sustainability is the level of funding in advance,which is particularly important when the ratio of w

114、orkers to retirees is declining.Therefore,this sub-index considers contribution rates,the level of pension assets and the coverage of the private pension system.In addition,real economic growth over the long term has a significant impact on the sustainability of pensions as it affects employment,sav

115、ing rates and investment returns.Given the growing importance and impact of climate change and other global effects on future investment returns,the sub-index also explores the relevance of economic,social and governance(ESG)factors on the investment policies or strategies adopted within each system

116、.Finally,given the key role that the provision of a public pension plays in most systems,the level of government debt and public pension expenditure represent important factors affecting a systems long-term sustainability and the future level of these pensions.Mercer CFA Institute Global Pension Ind

117、ex 20222102.Background to the Index|Integrity The third sub-index considers the integrity of the overall pension system,but with a focus on funded schemes,which are normally found in the private sector.As most systems rely on private pensions to play an increasingly important role in the provision o

118、f retirement income,it is critical that the community has confidence in the ability of private-sector pension providers to deliver retirement benefits over many years into the future.This sub-index therefore considers the role of regulation and governance,the protection provided to plan members from

119、 a range of risks and the level of communication provided to individuals.In each case,we consider the requirements set out in the relevant legislation and not the best practice delivered by some pension plans.In addition,we use the Worldwide Governance Indicators published by the World Bank to provi

120、de a broader perspective of governance within each country.An important contributor to the long-term confidence of members is that they receive good value from their pension plan and that costs are kept to a reasonable level.Although an objective comparison of the total costs of operating each syste

121、m is impractical,this sub-index includes some proxy measures relating to industry structure and scale that should provide a good indication.Mercer CFA Institute Global Pension Index 20222202.Background to the Index|13 The appendices provide the scores for all indicators in each sub-index so that rea

122、ders may calculate the effects of changing the weights used for each sub-index or the sensitivity of changing the weights within each sub-index.The construction of the Index In the construction of the Index,we have endeavored to be as objective as possible in calculating each systems index value.Of

123、course,we recognize that the Index is artificial,at least to some extent,as it does not calculate the pension that any retired individual will actually receive.Furthermore,it cannot recognize every aspect of a pension system,particularly the more subjective matters,such as community confidence.We al

124、so recognize that comparable international data are not available for every desirable feature.Nevertheless,where international data are available,we have used those data.In other cases,we have used objective questions about each system to obtain a better understanding of each systems operations and

125、outcomes.Some countries have more than one system,or different regulations exist in different parts of the country.Where this occurs,we have concentrated on the most common system or taken an average position.Each systems overall index value is calculated by taking 40%of the adequacy sub-index,35%of

126、 the sustainability sub-index and 25%of the integrity sub-index.These weightings have remained constant since the first edition of the Index in 2009.Although each sub-index is not weighted equally,the robustness of the overall results is worth noting;for example,re-weighting each sub-index equally d

127、oes not provide any significant changes to the overall results.Of course,the weighting of each indicator within each sub-index is subjective,as there is no“correct”answer.Our approach has been to give higher weightings to the more important indicators.13 Living standards in retirement are affected b

128、y a number of other factors,including the provision and costs of health services and aged care,through both the public and private sectors.However,some of these factors can be difficult to measure within different systems and,in particular,difficult to compare.We therefore decided to concentrate on

129、indicators that directly affect the provision of financial security in retirement,both now and into the future.The Index does not claim to be a comprehensive measure of living standards in retirement;rather,it is focused on the provision of financial security in retirement.Mercer CFA Institute Globa

130、l Pension Index 20222303.An overview of the changes in 2022During the first quarter of 2022,the Advisory Board conducted a thorough review of the Mercer CFA Institute Global Pension Index to improve the integrity of the Index and remove any unintended biases that may be present.In particular,the boa

131、rd wanted to ensure that the average score of each question within each sub-index was similar and that there were no statistically significant differences,which may have favored some systems over others.As a result of this review,some scoring calculations,questions and weightings have been modified,

132、as discussed below.The net effect of these changes to the model was to increase the average Index value by 1.09.Naturally,the impact on individual values varied between systems with most changes between minus one and plus two.Mercer CFA Institute Global Pension Index 202224We also increased the weig

133、hting for this question from 17.5%to 20%of the adequacy sub-index score,or from 7%to 8%of the overall index score,highlighting the importance of the minimum,basic or targeted pension.03.A thorough review of the Index|Adequacy sub-indexA1 Minimum pensionPreviously,the scoring calculation for this que

134、stion used a straight line for minimum pensions that were between 10%and 30%of the average wage.We have replaced this with a quadratic function,as shown below,which highlights that increasing the base pension from 10%to 20%is more important than an increase from 20%to 30%.Hence,a pension equal to 20

135、%of the average wage now scores 7.5 out of 10,instead of the previous score of five out of 10.10%12%14%16%18%20%24%26%28%30%Pension as percentage of wage0246810Score out of 10Old scoreNew scoreA6 Retirement incomeThe previous question considered the proportion of the retirement benefit required to b

136、e taken as an income stream.However,the financial needs of retirees go beyond regular income,as discussed in Chapter 4.Hence,we have now replaced this single question with a series of less prescriptive and broader questions,which recognize there is not a single solution to the“best”format of a retir

137、ement benefit.A7 Vesting,preservation and vestingWe decreased the weighting for this question from 7.5%to 5%of the adequacy sub-index score,or from 3%to 2%of the overall index score.This reduction recognizes that these important issues have been increasingly recognized around the world during the la

138、st decade,and therefore this question is now less important compared to some other issues.A10 Importance of growth assetsThe previous calculation gave a score of 2.5 out of 10 for a system with no growth assets,increasing to the maximum score of 10 when 45%or more of the pension systems assets are i

139、nvested in growth assets.We have now reduced the score for zero-growth assets to zero,with proportionate reductions for systems in which the level of growth assets is between 0%and 45%.Mercer CFA Institute Global Pension Index 20222503.A thorough review of the Index|0%25%50%75%100%125%150%175%Assets

140、 as a%of GDP0246810Score out of 10Old scoreNew scoreSustainability sub-indexS2 Level of pension assetsPreviously,the scoring calculation for this question used a straight line for the level of pension assets as a percentage of GDP,increasing from 0%to 175%of GDP.We have replaced this with a quadrati

141、c function,as shown below,which highlights that increasing the level of pension assets from 0%to 50%of GDP is more important than say,an increase from 100%to 150%.Therefore,a level of pension assets equal to 100%of GDP now scores 7.5 out of 10,instead of the previous score of 5.7 out of 10.Integrity

142、 sub-indexC1 CostsOne of the previous questions relating to the costs of the overall system asked about the percentage of all pension assets held by the largest 10 providers or funds.This question highlights that economies of scale matter and that larger funds should lead to a reduction in costs.How

143、ever,the use of a specific number of funds or providers namely 10 favored countries with smaller populations.Hence,we have now adjusted this question so that the specified number takes into account the population of the country;for example,the number used ranges from three for Iceland to 30 for Indi

144、a and ChinaMercer CFA Institute Global Pension Index 20222603.A thorough review of the Index|14 United Nations.World Population Prospects 2022,Summary of Results,2022.Additional systemWe expanded the Index in 2022 to include one new retirement income system Portugal.This addition continues our longs

145、tanding practice of considering a variety of systems from different economic,historical and political backgrounds.This approach highlights an important purpose of the Index:to enable comparisons of different systems around the world with a range of design features,operating within different contexts

146、 and cultures.The Index now includes 44 retirement income systems covering more than 65%of the worlds population.Updated OECD dataSince the publication of the 2021 Index,the OECD has published an updated version of Pensions at a Glance:OECD and G20 Indicators.This publication significantly increased

147、 the net replacement rates used for Colombia,Iceland and Mexico,when compared to the unpublished data used in the 2021 report.The OECD has also recently carried out significant post-pandemic work for the Asia-Pacific region.The OECD has been willing to share with us some updated but unpublished data

148、 on net replacement rates for this region,which we used within the adequacy sub-index.Updated UN Population ProspectsIn July 2022,the United Nations launched its latest edition of World Population Prospects.The sustainability sub-index uses data from this source,as we consider life expectancies,the

149、aged dependency ratio and the total fertility rate.The general findings are that:Total fertility rates are continuing to decline around the world.Global life expectancy continues to increase,although the increases are leveling off in some developed economies.Therefore,as a result of these trends,the

150、 percentage of the worlds population aged 65 or over is expected to increase from 9.7%in 2022 to 16.4%in 2050.14These long-term trends inevitably affect the sustainability of all pension programs.Therefore,the scores for the demography-related questions in the sustainability sub-index have fallen fo

151、r the majority of systems,with China,Saudi Arabia and Thailand suffering the largest reductions.This has reduced their overall Index scores by about 1.2.Mercer CFA Institute Global Pension Index 20222703.A thorough review of the Index|A comparison from 2021 to 2022Figure 6 compares the results for 4

152、3 systems from 2021 to 2022.The results show that the average score for the overall index increased by 2.0 with increases in each sub-index for a variety of reasons.Comments on each system are made in Chapter 5.Figure 6.Comparison index values for each system,including the three sub-indicesSystemTot

153、alAdequacySustainabilityIntegrity2022220222 Argentina 41.543.352.755.627.729.443.042.9 Australia 75.076.867.470.275.777.286.386.8 Austria 53.055.065.369.823.522.774.576.5 Belgium 64.567.974.980.836.339.187.487.5 Brazil 54.755.871.271.124.127.871.270.5 Canada 69.870.669.070.865.

154、764.776.778.6 Chile 67.068.357.660.068.870.379.378.9 China 55.154.562.664.443.539.359.460.0 Colombia 58.463.262.065.246.255.369.871.3Mercer CFA Institute Global Pension Index 202228SystemTotalAdequacySustainabilityIntegrity2022220222 Denmark 82.082.081.181.483.582.581.482.1 Fin

155、land 73.377.271.477.561.565.393.193.3 France 60.563.279.184.641.840.956.860.1 Germany 67.967.979.380.545.444.381.280.9 Hong Kong SAR 61.864.755.161.551.152.187.787.6 Iceland 84.284.782.785.884.683.886.084.4 India 43.344.433.537.641.840.761.060.4 Indonesia 50.449.244.739.343.644.569.271.5 Ireland 68.

156、370.078.075.947.453.582.183.7 Israel 77.179.873.675.776.181.983.983.2 Italy 53.455.768.272.321.323.174.974.7 Japan 49.854.552.958.037.544.561.963.0 Korea(South)48.351.143.440.152.754.950.063.5 Malaysia 59.663.150.657.257.560.276.876.903.A thorough review of the Index|Mercer CFA Institute Global Pens

157、ion Index 202229SystemTotalAdequacySustainabilityIntegrity2022220222 Mexico 49.056.147.363.154.757.143.843.6 Netherlands 83.584.682.384.981.681.987.987.8 New Zealand 67.468.861.864.062.564.783.282.1 Norway 75.275.381.279.057.460.490.290.3 Peru 55.055.858.854.744.251.564.163.7 P

158、hilippines 42.742.038.940.552.552.335.030.0 Poland 55.257.560.959.541.345.465.671.2 Saudi Arabia 58.159.261.761.450.954.362.562.5 Singapore 70.774.173.577.359.865.481.581.0 South Africa 53.654.744.344.246.549.778.578.4 Spain 58.661.872.980.028.128.778.378.9 Sweden 72.974.667.870.673.775.780.079.5 Sw

159、itzerland 70.072.365.468.767.270.581.380.7 Taiwan 51.852.940.842.051.953.269.369.803.A thorough review of the Index|Mercer CFA Institute Global Pension Index 202230SystemTotalAdequacySustainabilityIntegrity2022220222 Thailand 40.641.735.241.340.036.450.050.0 Turkey 45.845.347.7

160、45.628.629.866.766.6 UAE 59.661.859.763.850.251.972.672.6 UK 71.673.773.976.559.863.984.483.0 Uruguay 60.771.562.184.549.250.674.479.8 US61.463.960.967.563.661.259.261.7Average61.063.062.265.251.753.572.172.803.A thorough review of the Index|Mercer CFA Institute Global Pension Index 20223104.Convert

161、ing defined contribution benefits into better outcomes for retireesThe provision of retirement income to individuals and households has changed dramatically in many countries during the past two or three decades.This significant trend toward DC plans is not going to reverse and will continue to affe

162、ct an increasing number of retirees in years to come.Mercer CFA Institute Global Pension Index 20223215 Max S.“Nobel Prize-Winning Economist on How to Solve the Nastiest,Hardest Problem in Retirement,”Barrons,2019,available at defined contribution benefits into better outcomes for retirees|A challen

163、ging DC equation Employers are stepping away from defined benefit(DB)pension plans.Individuals are now bearing all the risks.Retirees are receiving lump sums,not pensions.Many households are not equipped to make financial decisions.Historically,most pension arrangements in developed economies(includ

164、ing social security and occupational DB schemes)provided a regular income payment to retirees for life,and often their partners life,too.In brief,retirees received a regular pension that was often indexed to inflation.Employer sponsors,who previously supported the DB pensions,have stepped away from

165、accepting any risks or providing any financial guarantee.Though government pensions have continued,the global shift to DC occupational pension plans has significantly changed the equation for retirees.Unlike DB pension plans,DC plans provide the individual with a lump-sum benefit(or pension pot)at r

166、etirement.All the risks during the years before and after retirement are transferred to the individual.Many governments have also reviewed,or are considering reviewing,their level of support of the government pension to ensure its sustainability over the longer term.These reviews need to take into a

167、ccount increasing life expectancies,the impact of the aging population and the increasing level of government debt,and perhaps lead to increases in the“official”retirement age or downward adjustments to the benefit formula used.The overall result is that many future retirees will no longer be able t

168、o rely on significant financial support from their previous employers and/or the government in times of financial stress.Individual responsibility has increased materially.Yet,most individuals and households are not prepared to make the necessary financial decisions at retirement and to maximize the

169、ir value from the available DC pension pot.It is a very difficult situation,particularly as the post-retirement years require much more complex decisions than the pre-retirement years when most individuals receive a relatively stable wage or salary and the primary purpose of the pension arrangements

170、 is to invest the funds.Of course,it can be even more difficult for those in the informal or“gig”labor force.William Sharpe,the Nobel Prize winning economist,acknowledges there is no easy answer to all the decisions that are necessary in“knowing how to strike a balance between having enough income t

171、o meet your current needs(in retirement)and having enough to get you through your lifetime.”He has called it the“nastiest,hardest problem in finance.”15 Nevertheless,the problem must be tackled so retirees can have a dignified retirement with both confidence and financial security.This chapter discu

172、sses the needs and desires of retirees,the questions they face,the range of products available,various approaches currently in use around the world,and the options for governments,policymakers and the pension industry to consider in achieving the best outcomes for future retirees.Mercer CFA Institut

173、e Global Pension Index 20223316 Chen A,Munnell AH.“Do retirees want to consume more,less,or the same as they age?”Center for Retirement Research at Boston College,2021,available at https:/crr.bc.edu/briefs/do-retirees-want-to-consume-more-less-or-the-same-as-they-age17 Alonso-Garcia J,Bateman H,Bone

174、kamp J,et al.“Saving preferences after retirement,”Journal of Economic Behavior and Organization,198(2022),pp.409433.04.Converting defined contribution benefits into better outcomes for retirees|The needs and desires of retireesMost retirees wish to maintain their previous living standard in retirem

175、ent,possibly at a level similar to that experienced in the previous 10 or 20 years.This reflects an important starting point as it means a career-average approach,spanning 40 years or more,is unlikely to reflect the desires of many retirees.Retirees need to consider the possibility of retirement las

176、ting 30 or more years,which is well beyond the planning horizon for most people.Furthermore,the concept of longevity risk is not well understood or appreciated by most individuals approaching retirement.What do retirees want?Stability Sustainability Flexibility Bequest TransparencyRetirees want stab

177、ility a regular and reliable income that keeps pace with price inflation.This provides a secure base for their future living standards.There is some debate as to whether full-price inflation is needed,as several studies suggest that retired households actually decrease their consumption over time.Al

178、though health-related expenditure may increase with age,some other expenditures,such as travel,decrease,leading to an overall reduction in real expenditure.However,Chen and Munnell suggest wealthier and healthier households have relatively flat consumption paths,whereas households with less wealth o

179、r poorer health at retirement have declining consumption during retirement.16 In reality,these differences may not reflect the preferred paths of retirees,if additional wealth or better health existed.Therefore,the objective should be to enable retirees to maintain their living standards throughout

180、retirement.Retirees want sustainability that is,income that does not run out,whatever the future may hold.Although most retirees will be unaware of their life expectancy(which,after all,is only an average number),they are aware they do not know their date of death.Or,to put it another way,how long d

181、oes the income need to last?A related risk is that poor decisions,economic conditions or a fall in asset values may reduce the real value of the underlying pension pot faster than expected.The importance of these risks for each retiree is also affected by the size and characteristics of government s

182、upport available in the future.Retirees want flexibility that is,to be able to access some capital or a“rainy day”fund unexpected costs occur,and retirees want to be able to meet them.The extent of these capital needs,which could relate to significant medical costs or pharmaceuticals,necessary refur

183、bishment of the home to accommodate reducing mobility or the costs associated with aged care,will vary considerably between individuals.It will also depend on the extent to which government assistance is available to meet such costs.When government funding is available,it is also important that reti

184、rees fully appreciate its availability.Some retirees wish to leave a bequest.On the other hand,“The intra-household bequest is important but not the intended bequest motive.This suggests that people save for unexpected expenses and to financially protect their partner as a surviving spouse but are l

185、ess concerned about the distant future.”17 Nevertheless,the combination of a“rainy day”fund and a mild bequest motive means that many retirees wish to preserve some of their pension pot for the future.That is,they may use some of it(if needed)or leave it to their children or favorite charity.Finally

186、,retirees want transparency.Retirees need to know the fees,any taxation implications and the possible outcomes of various options.As costs are normally disclosed during the accumulation period of DC pension plans,future costs should also be disclosed in respect of retirement products.Mercer CFA Inst

187、itute Global Pension Index 20223418 Probasco J.“A Decade Later:How the Financial Crisis Affected Seniors,”Investopedia,202219 Morgan Stanley.“Retirement Income in Volatile Markets,”On Retirement,2019.04.Converting defined contribution benefits into better outcomes for retirees|Impact of moving from

188、DB to DCThe move from DB to DC arrangements allows DC plan members to view their accumulated balance and investments through their regular statement,from the plans website or through the plans app.Indeed,some governments even encourage members to consider the DC balance as“their money.”This is very

189、different from DB plans,for which members have a promise that,in some cases,can be difficult to understand.This different approach has also led to the more engaged DC members wanting increased control over their investments,which feeds into their decisions as they approach retirement.For example,if

190、a DC pension plan member is able to select their investment strategy and,in some cases,even select their equity investments before retirement,we can reasonably expect that such freedom will continue when the individual retirees.This is quite different from a lifetime annuity,for which the member is

191、not involved in any investment decisions.However,although some DC members are more engaged,many DC members remain disengaged and have very limited understanding,both before and after retirement.These members are likely to rely on default arrangements.Another important outcome of the increasing domin

192、ance of DC pension plans is that more plan members have become accustomed to market volatility.During their working years,they have seen the value of their account balance move up and down with financial markets.Therefore,as they move into retirement,they may expect similar outcomes and thereby more

193、 readily accept some variability in outcomes.In fact,evidence shows that some retirees will adjust their expenditure in line with the markets.That is,like all demographic groups,during periods of financial uncertainty they will spend less and cut back on some expenditure18;for example,in years of ma

194、rket decline,the retiree may decide to take a local holiday instead of going further afield.In fact,such belt-tightening is consistent with some financial advice when markets are performing poorly.19 In summary,the desires of retirees are not all the same and vary considerably.This outcome suggests

195、that a single product does not achieve the most desirable outcome for all retirees.Some flexibility is desirable.Mercer CFA Institute Global Pension Index 20223504.Converting defined contribution benefits into better outcomes for retirees|Questions that retirees need to answerRetirees(and hence prod

196、uct providers and financial advisors)need to consider many issues when deciding the most appropriate portfolio of retirement products.What is the minimum level of income?What is the likely period of retirement?What is the retirees risk profile?Does the retiree have any significant debt?Are there any

197、 ongoing decisions?As suggested above,the main objective for most individuals and households approaching retirement is to maintain their standard of living.To achieve the best outcome,the following questions need to be asked:What is the minimum level of income required to maintain their standard of

198、living?This should allow for any partners income,any government pension,any income from part-time work and any other income from outside the pension plan.In addition,if the retiree is a homeowner,this could include income from an equity release arrangement in the future.This can be important for man

199、y households in developed economies when the family home can be worth much more than the pension pot at retirement.Alternatively,if the retiree is renting their home,the future levels of rent can be a very significant cost.What is the likely period of retirement?Of course,this is unknown;however,it

200、will depend on the actual retirement age,the health and the lifestyle of the individual and any partner.We should also note that mortality rates and therefore life expectancies vary by socioeconomic class.Given the retirement period is unknown,it is wise to consider the life expectancy of their indi

201、vidual and their partner,and add at least five years to any figure that may be used.What is the retirees risk profile?That is,the extent to which some level of“guaranteed income”is desirable or,indeed,a requirement.Of course,whenever there is a guarantee,a cost is included in the price of the produc

202、t,which is often implied rather than explicit.Alternatively,the retiree may be willing to“ride the markets”and live with the consequences.To express that another way,how perturbed would the retiree be if their income or accumulated benefit dropped in value by 5%,10%or 20%?Does the retiree have any s

203、ignificant debt?(For example,a mortgage or credit card debt.)Members of DC plans often intend to use part of their pension pot to repay any debts and so begin retirement debt-free.Although this may not have been the original purpose of pensions,such payment removes future repayments and thereby simp

204、lifies financial planning for retirement.Are there any ongoing decisions required in the future?Ones cognitive ability declines with age,and it is therefore unreasonable to expect retirees in their 80s and 90s to continue to make key financial decisions.Although a“set and forget”approach for 30 year

205、s is not necessarily the best approach,nor is a complex arrangement that includes many components and requires ongoing decisions.Simplicity has a huge advantage.These questions have no single answers,and they will change during the period of retirement.Nevertheless,consideration of these and similar

206、 issues should help pension plans develop the most appropriate set of products for their retirees.Mercer CFA Institute Global Pension Index 20223620 Antolin P,Pugh C,Stewart F.“Forms of Benefit Payments at Retirement,”OECD Working Papers on Insurance and Private Pensions,No 26(2008),OECD publishing.

207、21 For example,the Retirement Income Review in Australia found that retirees are generally reluctant to draw down their savings in retirement due to a number of factors including“reluctance to consume funds that are called nest eggs,concerns about possible future health and aged care costs,and conce

208、rns about outliving savings.”04.Converting defined contribution benefits into better outcomes for retirees|The products availableIn many cases,a single product will not deliver the most desirable outcome.Rather,a hybrid arrangement including some of the following products may be the best way forward

209、 for using the individuals DC pension pot.Lump-sum payment The payment of a lump sum at retirement is relatively simple and provides retirees with the opportunity to pay off debt and set themselves up for retirement,although there may be tax consequences.It also requires the retiree to make investme

210、nt and spending decisions and provides no longevity protection.As Antolin notes,“Few retirees are really prepared to self-annuitize as they lack appropriate financial skills and discipline.”20 Programmed withdrawal These arrangements offer greater flexibility than an annuity and can deliver a higher

211、 investment return as no guarantee is present.However,they are subject to the fluctuations of the financial markets and the money can run out.It has also been observed that in the absence of any longevity protection or well-designed minimum drawdown requirements,some retirees withdraw their funds at

212、 an overly cautious rate,thereby reducing their standard of living and leaving a larger than intended bequest.21 These arrangements can also include a bucketing approach with different asset classes in different buckets.Immediate annuity An immediate annuity offered by a life insurance company provi

213、des regular income for life(which may also include their partners life)and can provide a good base for the necessities of life.However,the individual forgoes any control and normally locks in the current price(that is,linked to current interest rates)for the rest of their life.Market-linked(or varia

214、ble)annuities are also available for which the level of income is affected by the financial markets.Whatever the actual design of the annuity,the pooling of longevity risk provides a more efficient outcome than self-annuitization.Yet,in many markets,the annuity puzzle remains and products,which have

215、 theoretical appeal,do not receive broad market acceptance.Collective pooled arrangements An alternative to an annuity,with a partial or full guarantee,is a collective pooled arrangement whereby the income generated will depend on the investment and mortality experience of the pool of participants.A

216、lthough such arrangements have the potential to generate higher retirement incomes due to the absence of any guarantee,participants need to be made aware of the inherent uncertainty,as occurs with most variable annuities.Deferred annuity A deferred annuity commences at a nominated later age and can

217、also provide longevity protection to the retiree.However,many retirees are reluctant to purchase such a product,as an early death would normally mean limited or no return from the investment.This product may also be less attractive to some insurers as the premium received is reduced,and there is a s

218、ignificant tail risk.Mercer CFA Institute Global Pension Index 20223722 OECD.Recommendations of the council for the good design of defined contribution pension plans,2022.23 American Academy of Actuaries,Institute and Faculty of Actuaries and Actuaries Institute Australia.The challenge of longevity

219、risk:Making retirement income last a lifetime,2015.04.Converting defined contribution benefits into better outcomes for retirees|What is the best balance?The OECD suggests that:“DC pension plans should provide some level of lifetime income as a default for the pay-out phase,unless other pension arra

220、ngements already provide for sufficient lifetime pension payments Full lump sums should be discouraged in general,except for low account balances or extreme circumstances.”22 Interestingly,the OECD seems to support a hybrid arrangement with some lifetime income together with other products.Three nat

221、ional actuarial bodies concluded that:“There would be value in developing appropriate defaults that allow individuals to access their pensions through an income stream that offers flexibility in their early years of retirement.However in the latter years,they could provide,at a minimum,a structured

222、lifetime payment with the potential for a lifetime income guarantee to protect against their longevity risk.”23 Again,the conclusion was not a single product,but some combination of flexibility and longevity protection.Mercer CFA Institute Global Pension Index 20223804.Converting defined contributio

223、n benefits into better outcomes for retirees|Another example of this hybrid approach is the three objectives of the Retirement Income Covenant recently introduced into legislation in Australia.The objectives are:To maximize expected retirement income over the period of retirement To manage expected

224、risks to the sustainability and stability of retirement income To have flexible access to expected fundsThree systems(Australia,UK and the US)have considerable flexibility and retirees can spend or invest their benefit as they wish.Yet,within each of these systems,there has been recognition that thi

225、s“freedom”does not necessarily lead to the best outcome for retirees.These governments have recognized that there is a need to help retirees in their decision-making process in the following ways:Australia:The Federal Government introduced a Retirement Income Covenant from 1 July 2022 that requires

226、plan trustees to develop a retirement income strategy,which addresses how the trustee will assist beneficiaries to achieve and balance the three objectives stated in the covenant,as described above.UK:The UK Government introduced new regulations to encourage or nudge more pension plan members to mak

227、e use of the free guidance provided by Pension Wise.These regulations require trustees and providers to refer the member to Pension Wise guidance,explain its nature and purpose and to offer to book an appointment for the member,whenever the member makes an application to access their pension savings

228、.US:The SECURE Act,which was signed into law in December 2019,increases the flexibility of Americas pension system in several ways,including a new safe-harbor provision that encourages 401(k)plans to offer annuities by removing the fear of legal liability on employers.Each of these developments reco

229、gnizes the need for more flexibility and assistance in systems where the importance of DC plans continue to grow.Mercer CFA Institute Global Pension Index 202239Suggestions for policymakers to make a differenceThe myriad of risks associated with the provision of private pensions for decades to come

230、is shifting from the employer sponsor to the individual,who now bears all the inflation,investment and longevity risks.These risks can be reduced with some pension products and by means-tested government support available in retirement.Notwithstanding the different retirement income systems around t

231、he world,the significant differences between DB and DC are central to the ongoing communication to plan members,as well as their understanding and decision-making processes in retirement.DC arrangements need to be more flexible and recognize that the greater heterogeneity between DC pensioners when

232、compared to DB pensioners.With these differences in mind,we suggest the following principles for the development of retirement products for DC pension plan members who are entitled to receive a lump-sum benefit or pension pot at retirement.Members with small pension pots(say,with pots of up to 50%or

233、 75%of the average full-time wage)should be able to take these as a lump-sum benefit.This should not be a requirement,but an option,as it recognizes the relatively significant costs associated with small pensions.DC pension plan retirees with pension pots above the minimum should be able to withdraw

234、 up to half24 of their initial pension pot during retirement without significant disincentives.This will provide them with flexibility while also ensuing that at least half of their initial benefit provides regular income.At least half25 of the pension pot should be converted into an income stream t

235、hat provides regular and relatively stable income,when measured in real terms.The permitted income streams should include an annuity,a pooled arrangement or a programmed withdrawal product,thereby encouraging some flexibility.This income requirement should apply until the total income(including any

236、government pension)reaches the average full-time wage.Once this income threshold is reached,no further requirement is needed because this level of income is sufficient to provide a dignified retirement.24 A lower percentage may be appropriate when no government pension is available.25 Some flexibili

237、ty in this percentage may be appropriate to take into account the pension pot of any partner,the health status of the retiree and whether the retiree is a homeowner.04.Converting defined contribution benefits into better outcomes for retirees|Mercer CFA Institute Global Pension Index 202240 The actu

238、al design of the income stream should not be prescribed to encourage innovation and competition.However,some form of longevity protection should be required,while also recognizing that equity considerations relating to gender,health and socioeconomic class need to be taken into account with the pool

239、ing of longevity risk.The development of default retirement products,consistent with the above principles,is strongly recommended,as many pension plan members will not be engaged.A limited range of alternative products(for example,with different investment strategies)is appropriate to recognize the

240、different attitudes toward risk among retirees.Some portability between retirement products is also desirable to retain some competition and choice.Financial education,guidance and independent limited financial advice should be available to all pension plan members approaching and during retirement,

241、including the availability of digital tools,which can allow for non-pension assets.The broad availability of education,guidance and advice is particularly necessary given the range of financial literacy within the broader coverage of the population with DC pension plans when compared with many other

242、 savings and investment products.Reforms relating to the conversion of DC pension pots into retirement products should be introduced gradually.A sudden change does not encourage community confidence as many individuals and households make plans as they approach retirement.The conversion of DC pensio

243、n pots into appropriate retirement products is gradually emerging around the world,and there is no single or perfect answer.It is much more complex than the provision of DB pensions for the reasons mentioned above.The global pension industry and policymakers need to recognize these issues and develo

244、p a range of flexible products and policies to deliver the best possible outcomes for individuals and households who will enter their retirement years in a wide range of financial situations while also facing significant uncertainties.04.Converting defined contribution benefits into better outcomes

245、for retirees|Mercer CFA Institute Global Pension Index 20224105.A brief review of each systemThis chapter provides a brief summary of each retirement income system in this study,together with some suggestions that would if adopted raise the overall index value for that system.Of course,whether such

246、developments are appropriate in the short term depend on the current social,political and economic situation.When relevant,we also make a brief comment about the change in the systems index value from 2021 to 2022.As detailed in Chapter 3,many of these changes were due to the review of the Index and

247、 updated data from the OECD and the United Nations.Mercer CFA Institute Global Pension Index 202242AB+BC+CDEFigure 7.Global grades05.A brief review of each system|Mercer CFA Institute Global Pension Index 20224305.A brief review of each system|ArgentinaOverallindexRankAdequacysub-indexSustainability

248、sub-indexIntegritysub-index55.635404329.442.943.3Rank out of 4442Argentinas retirement income system is composed of a pay-as-you-go social security system(comprising a basic pension and an earnings-related benefit)together with voluntary occupational corporate and individual pension plans that may b

249、e offered through employer book reserves,insurance companies or pension trusts.The overall index value for the Argentinian system could be increased by:Increasing coverage of employees in occupational pension schemes through automatic membership or enrollment,thereby increasing the level of contribu

250、tions and assets Introducing a minimum level of mandatory contributions into a retirement savings fund Introducing a minimum age to access benefits from private pension plans Improving the regulatory requirements for the private pension systemThe Argentinian index value increased from 41.5 in 2021 t

251、o 43.3 in 2022,primarily due to the revised scoring for the minimum pension and increased private pension coverage.AustraliaOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index205676.8Rank out of 44670.277.286.8Australias retirement income system comprises a means-tested age pe

252、nsion(paid from general government revenue);a mandatory employer contribution paid into private-sector arrangements(mainly DC plans);and additional voluntary contributions from employers,employees or the self-employed paid into private-sector plans.The overall index value for the Australian system c

253、ould be increased by:Moderating the assets test on the means-tested age pension to increase the net replacement rate for average-income earners Introducing a requirement that part of the retirement benefit be taken as an income stream in most circumstances Introducing a government contribution to al

254、l primary carers in the first year of a childs life Introducing a requirement to show benefit projections on members annual statementsThe Australian index value increased from 75.0 in 2021 to 76.8 in 2022,primarily due to the revised scoring discussed in Chapter 3.Mercer CFA Institute Global Pension

255、 Index 20224405.A brief review of each system|AustriaOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index21442355Rank out of 443369.822.776.5Austrias retirement income system consists of a DB public pension scheme with an income-tested top-up for low-income pensioners and volun

256、tary private pension plans.The overall index value for the Austrian system could be increased by:Increasing the minimum level of support for the poorest aged individuals Introducing a minimum access age so the benefits from private pension plans are preserved for retirement purposes Increasing cover

257、age of employees in occupational pension schemes thereby increasing the level of contributions and assets(which could be done by collective bargaining agreements or tax-effective regulation)Introducing arrangements to protect the pension interests of both parties in a divorce Increasing the labor fo

258、rce participation rate at older agesThe Austrian index value increased from 53.0 in 2021 to 55.0 in 2022,primarily due to the revised scoring for the minimum pension.BelgiumOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index736567.9Rank out of 441880.839.187.5Belgiums retireme

259、nt income system comprises public,occupational and private pension schemes.The public pension scheme is earnings-related with a means-tested safety net.Voluntary private pension arrangements are typically operated by insurance companies.The overall index value for the Belgian system could be increas

260、ed by:Introducing a requirement that part of the retirement benefit must be taken as an income stream Increasing coverage of private pension arrangements,thereby increasing the level of assets over time Introducing a minimum level of mandatory contributions into a retirement savings fund Introducing

261、 greater flexibility relating to pension design as individuals transition to retirement Increasing the labor force participation rate at older ages as life expectancies riseThe Belgian index value increased from 64.5 in 2021 to 67.9 in 2022,primarily due to the revised scoring discussed in Chapter 3

262、.Mercer CFA Institute Global Pension Index 20224505.A brief review of each system|BrazilOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index17423055.8Rank out of 443171.127.870.5Brazils retirement income system comprises a pay-as-you-go social security system and voluntary occu

263、pational corporate and individual pension plans.These plans may be offered through insurance companies or pension trusts.The overall index value for the Brazilian system could be increased by:Increasing coverage of employees in occupational pension schemes through automatic membership or enrollment,

264、thereby increasing the level of contributions and assets Introducing a minimum level of mandatory contributions into a retirement savings fund Introducing a minimum access age so the benefits are preserved for retirement purposes,mainly for the pension plans implemented in insurance companies Enabli

265、ng individuals to retire gradually while receiving a part pensionThe Brazilian index value increased slightly from 54.7 in 2021 to 55.8 in 2022,primarily due to the revised scoring relating to assets and the updated demographic data.CanadaOverallindexRankAdequacysub-indexSustainabilitysub-indexInteg

266、ritysub-index18112070.6Rank out of 441370.864.778.6Canadas retirement income system comprises a universal flat-rate pension supported by a means-tested income supplement;an earnings-related pension based on revalued lifetime earnings,provided through a national program;voluntary occupational pension

267、 schemes(many of which are DB schemes);and voluntary individual retirement savings plans.The overall index value for the Canadian system could be increased by:Increasing the coverage of employees in occupational pension schemes through the development of an attractive product for those without an em

268、ployer-sponsored scheme Introducing a minimum access age for all pension products Increasing the level of household savings and reducing the level of household debt Reducing government debt as a percentage of GDP Increasing the labor force participation rate at older ages as life expectancies rise I

269、ncreasing flexibility in the retirement benefits providedThe Canadian index value increased slightly from 69.8 in 2020 to 70.6 in 2022 due to several minor changes.Mercer CFA Institute Global Pension Index 20224605.A brief review of each system|ChileOverallindexRankAdequacysub-indexSustainabilitysub

270、-indexIntegritysub-index3181968.3Rank out of 44166070.378.9Chiles retirement income system comprises means-tested social assistance;a mandatory privately managed DC system based on employee contributions,with individual accounts managed by a small number of Administradoras de Fondos de Pensiones(AFP

271、s);and a framework for supplementary plans sponsored by employers(the APVC schemes).The overall index value for the Chilean system could be increased by:Increasing the minimum level of support for the poorest aged individuals Increasing the retirement age for women Introducing a minimum age for acce

272、ss to retirement benefits from private pensions Requiring annual reports of pension plans to be made available to all membersThe Chilean index value increased from 67.0 in 2021 to 68.3 in 2022,primarily due to the revised scoring discussed in Chapter 3.ChinaOverallindexRankAdequacysub-indexSustainab

273、ilitysub-indexIntegritysub-index25354054.5Rank out of 443664.439.360Chinas retirement income system comprises an urban system and a rural social system,as well as systems for rural migrants and public-sector workers.The urban and rural systems have a pay-as-you-go basic pension consisting of a poole

274、d account(from employer contributions or fiscal expenditure)and funded individual accounts(from employee contributions).Supplementary plans are also provided by some employers,particularly in urban areas.A voluntary pillar three private pension arrangement was unveiled in 2022.The overall index valu

275、e for the Chinese system could be increased by:Increasing the minimum level of support for the poorest aged individuals Continuing to increase the coverage of workers in pension systems Introducing a requirement that part of the supplementary retirement benefit must be taken as an income stream Incr

276、easing the state pension age over time Offering more investment options to members and thereby permitting greater exposure to growth assetsThe Chinese index value decreased slightly from 55.1 in 2021 to 54.5 in 2022,primarily due to the updated demographic data.Mercer CFA Institute Global Pension In

277、dex 20224705.A brief review of each system|ColombiaOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index24182863.2Rank out of 442165.255.371.3Colombias retirement income system comprises a means-tested pension paid to the needy and two parallel and mutually exclusive pension sys

278、tems.The first is a pay-as-you-go DB plan managed by a public-sector entity,and the second is a system of funded individual accounts offered through qualified financial institutions in the private sector.Individuals can make additional voluntary contributions to increase retirement benefits and/or r

279、educe taxes.An employee elects to join one system,although they can opt to change later,within certain restrictions.The employer and employee contribution rates are the same for both systems,but retirement benefits differ between systems(DB versus individual accounts).The overall index for the Colom

280、bian system could be increased by:Increasing the minimum level of support for the poorest aged individuals Raising the level of household saving Increasing coverage of employees in the pension schemes,thereby gradually increasing the level of assets Raising the state pension age over time,particular

281、ly for females Introducing arrangements to protect the pension interests of both parties in a divorceThe Colombian index value increased from 58.4 in 2021 to 63.2 in 2022,primarily due to increased net replacement rates and higher private pension coverage.DenmarkOverallindexRankAdequacysub-indexSust

282、ainabilitysub-indexIntegritysub-index621282Rank out of 44381.482.582.1Denmarks retirement income system comprises a public pension scheme that provides a basic pension,a means-tested supplementary pension benefit,a fully funded DC scheme providing lifelong pensions and mandatory occupational DC sche

283、mes.The overall index value for the Danish system could be increased by:Raising the level of household saving and reducing the level of household debt Introducing arrangements to protect the interests of both parties in a divorce Introducing a requirement for all pension plans to produce an annual r

284、eport available to all members Introducing a requirement to show benefit projections on members annual statementsThe Danish index value remained unchanged at 82.0.Mercer CFA Institute Global Pension Index 20224805.A brief review of each system|FinlandOverallindexRankAdequacysub-indexSustainabilitysu

285、b-indexIntegritysub-index1110177.2Rank out of 44577.565.393.3Finlands retirement income system consists of a basic state pension,which is income-tested,and a range of statutory earnings-related schemes.The overall index value for the Finnish system could be increased by:Increasing the minimum level

286、of support for the poorest aged individuals Raising the level of household saving and reducing the level of household debt Continuing to raise the level of mandatory contributions set aside for the future Introducing arrangements to protect the pension interests of both parties in a divorceThe Finni

287、sh index value increased from 73.3 in 2021 to 77.2 in 2022,primarily due to an increase in social assistance and the revised scoring discussed in Chapter 3.FranceOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index4333963.2Rank out of 442284.640.960.1Frances retirement income s

288、ystem comprises an earnings-related public pension with a minimum pension and a supplementary retirement pension scheme for private-sector workers(known as AGIRC-ARRCO).France also has voluntary occupational plans.The overall index value for the French system could be increased by:Increasing the lev

289、el of funded contributions,thereby increasing the level of assets over time Increasing the state pension age Increasing the labor force participation rate at older ages as life expectancies rise Improving the regulatory requirements for the private pension system The French index value increased fro

290、m 60.5 in 2021 to 63.2 in 2022,primarily due to the revised scoring as discussed in Chapter 3.Mercer CFA Institute Global Pension Index 20224905.A brief review of each system|GermanyOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index8321467.9Rank out of 441780.544.380.9Germany

291、s retirement income system comprises an earnings-related pay-as-you-go system based on the number of pension points earned during an individuals career;a means-tested safety net for low-income pensioners;and supplementary pension plans,which are common among major employers.These plans typically ado

292、pt either a book-reserving approach,with or without segregated assets,or an insured pensions approach.The overall index value for the German system could be increased by:Increasing the minimum pension for low-income pensioners Increasing the level of funded contributions in private pension plans,the

293、reby increasing the level of assets over time Increasing coverage of employees in occupational pension plansThe German index value remained unchanged at 67.9.Hong Kong SAR,ChinaOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index2924464.7Rank out of 441961.552.187.6Hong Kongs r

294、etirement income system consists of mandatory provident funds(MPFs)into which employers,most employees and the self-employed are each required to make mandatory contributions of 5%of relevant income,subject to minimum and maximum relevant-income levels.Scheme members who have reached the age of 65,o

295、r who have reached the age of 60 and have decided to retire early,can choose to either withdraw their MPF benefits as a lump sum or in instalments or retain all their MPF benefits in their accounts for continuous investment.The overall index value for the Hong Kong SAR system could be increased by:I

296、ntroducing a requirement that part of the retirement benefit must be taken as an income stream Increasing the minimum pension for low-income pensioners Increasing the level of household savings and reducing the level of household debt Increasing the labor force participation rate at older ages as li

297、fe expectancies rise Introducing requirements to protect all the pension interests of both parties in a divorceThe index value for Hong Kong SAR increased from 61.8 in 2021 to 64.7 in 2022,primarily due to the revised scoring discussed in Chapter 3 and increases in the net replacement rates.Mercer C

298、FA Institute Global Pension Index 20225005.A brief review of each system|IcelandOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index11784.7Rank out of 44185.883.884.4Icelands retirement income system comprises a basic state pension and a pension supplement(both of which are inc

299、ome-tested according to different rules);mandatory occupational private pension schemes with contributions from both employers and employees;and voluntary personal pensions.The overall index value for the Icelandic system could be increased by:Reducing the level of household debt as a percentage of

300、GDP Introducing arrangements to protect all the pension interests of both parties in a divorce Reducing government debt as a percentage of GDPThe index value for Iceland increased slightly from 84.2 in 2021 to 84.7 in 2022,primarily due to an increase in the net replacement rates.IndiaOverallindexRa

301、nkAdequacysub-indexSustainabilitysub-indexIntegritysub-index44343844.4Rank out of 444137.640.760.4Indias retirement income system comprises an earnings-related employee pension scheme,a DC employee provident fund(EPFO)and supplementary employer-managed pension schemes,which are largely DC in nature.

302、Government schemes have been launched as part of the universal social security program aimed at benefiting the unorganized sector.The overall index value for the Indian system could be increased by:Introducing a minimum level of support for the poorest aged individuals Increasing coverage of pension

303、 arrangements for the unorganized working class Introducing a minimum access age so it is clear that benefits are preserved for retirement purposes Improving the regulatory requirements for the private pension systemThe Indian index value increased from 43.3 in 2021 to 44.4 in 2022,primarily due to

304、an increase in the net replacement rates and the revised scoring discussed in Chapter 3.Mercer CFA Institute Global Pension Index 20225105.A brief review of each system|IndonesiaOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index43312749.2Rank out of 443939.344.571.5Indonesias

305、 retirement income system comprises earnings-related civil service pensions,mandatory DC plans for private-sector workers and voluntary DC plans for other workers.The national pension scheme is a DB scheme funded through employer and employee contributions.The overall index value for the Indonesian

306、system could be increased by:Introducing a minimum level of support for the poorest aged individuals Increasing coverage of employees in occupational pension schemes,thereby increasing the level of contributions and assets Improving the regulatory requirements for the private pension system Improvin

307、g the required level of communication to members of pension arrangementsThe Indonesian index value decreased from 50.4 in 2020 to 49.2 in 2022,primarily due to the revised scoring discussed in Chapter 3.IrelandOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index1421870Rank out

308、of 441475.953.583.7Irelands retirement income system comprises a flat-rate basic social security pension and a means-tested benefit for those without sufficient social insurance contributions.Voluntary occupational pension schemes and personal pension schemes provide supplementary income in retireme

309、nt and cover about 66%of the working population.The overall index value for the Irish system could be increased by:Continuing to increase coverage of employees in occupational pension schemes by introducing the new mandatory enrollment arrangements,thereby increasing the level of contributions and a

310、ssets Implementing government plans to introduce a minimum level of mandatory contributions into a retirement savings fund,thereby increasing the level of assets Increasing the labor force participation rate at older ages as life expectancies rise Providing greater protection of members accrued bene

311、fits The Irish index value increased from 68.3 in 2021 to 70.0 in 2022,primarily due the revised scoring discussed in Chapter 3 and an increase in the net replacement rates.Mercer CFA Institute Global Pension Index 20225205.A brief review of each system|IsraelOverallindexRankAdequacysub-indexSustain

312、abilitysub-indexIntegritysub-index154979.8Rank out of 44475.781.983.2Israels retirement income system comprises a universal state pension with an income-tested supplement and private pensions with compulsory employer and employee contributions.Since 2008,there has been a requirement to take a minimu

313、m annuity.The overall index value for the Israeli system could be increased by:Increasing the level of assets held in funded pension arrangements Reducing government debt as a percentage of GDP Improving protection for members of private pension plans in the event of mismanagement or fraud Introduci

314、ng a carers pension credit for those caring for young childrenThe Israeli index value increased from 77.1 in 2021 to 79.8 in 2022,primarily due to an increase in the level of assets and the revised scoring discussed in Chapter 3.ItalyOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritys

315、ub-index16432455.7Rank out of 443272.323.174.7Italys retirement income system comprises a notional DC scheme for workers and a minimum means-tested social assistance benefit.Voluntary supplementary occupational schemes also exist;coverage is low but gradually increasing.The overall index value for t

316、he Italian system could be increased by:Increasing coverage of employees in occupational pension schemes,thereby increasing the level of contributions and assets Continuing to raise the labor force participation rate at older ages as life expectancies rise Restricting the availability of benefits be

317、fore retirement(other than bridge pensions)Reducing government debt and government spending on pensions as a percentage of GDPThe Italian index value increased from 53.4 in 2021 to 55.7 in 2022,primarily due to the revised scoring discussed in Chapter 3 and a higher base pension.Mercer CFA Institute

318、 Global Pension Index 20225305.A brief review of each system|JapanOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index33303554.5Rank out of 44355844.563Japans retirement income system comprises a flat-rate basic pension,an earnings-related public pension and voluntary private p

319、ension plans.The overall index value for the Japanese system could be increased by:Continuing to increase the level of private pension coverage and thereby increase the level of contributions and pension plan assets Introducing an encouragement that part of the retirement benefit must be taken as an

320、 income stream,such as an annuity payment Announcing a further increase in the state pension age as life expectancies rise Reducing the level of government debt as a percentage of GDP The Japanese index value increased from 49.8 in 2021 to 54.5 in 2022,primarily due to the revised scoring discussed

321、in Chapter 3 and a revised approach relating to the measurement of pension plan coverage.Korea(South)OverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index42193451.1Rank out of 443840.163.554.9Koreas retirement income system comprises a public earnings-related pension scheme with

322、 a progressive formula,based on both individual earnings and the average earnings of the insured as a whole,and statutory private pension plans.The overall index value for the Korean system could be increased by:Improving the adoption of ERSA scheme plans Improving the level of support provided to t

323、he poorest pensioners Introducing a requirement that part of the retirement benefit from private pension arrangements be taken as an income stream Increasing the level of funded contributions,thereby increasing the level of assets over time Improving the governance and communication requirements for

324、 the private pension systemThe Korean index value increased from 48.3 in 2021 to 51.1 in 2022,primarily due to a higher integrity sub-index score and the revised scoring discussed in Chapter 3.Mercer CFA Institute Global Pension Index 20225405.A brief review of each system|MalaysiaOverallindexRankAd

325、equacysub-indexSustainabilitysub-indexIntegritysub-index34162263.1Rank out of 442357.260.276.9Malaysias retirement income system is based on the Employee Provident Fund(EPF),which covers all private-sector employees and non-pensionable public-sector employees.Under the EPF,some benefits are availabl

326、e to be withdrawn at any time(under predefined circumstances,including education,home loans or severe ill health),with other benefits preserved for retirement.The overall index value for the Malaysian system could be increased by:Increasing the minimum level of support for the poorest aged individua

327、ls Raising the level of household saving and lowering the level of household debt Introducing a requirement that part of the retirement benefit be taken as an income stream Increasing the pension age and the labor force participation rate at older ages as life expectancies riseThe Malaysian index va

328、lue increased from 59.6 in 2021 to 63.1 in 2022,primarily due to an increase in the net replacement rates and the revised scoring discussed in Chapter 3.MexicoOverallindexRankAdequacysub-indexSustainabilitysub-indexIntegritysub-index28174256.1Rank out of 442963.157.143.6Mexicos retirement income sys

329、tem comprises a social security retirement system with a means-tested age pension and a mandatory and funded DC system that includes a minimum pension and voluntary occupational pension schemes.There is also a universal pension for all Mexicans from age 68.The overall index value for the Mexican sys

330、tem could be increased by:Increasing the level of the pension paid to the poorest aged individuals Increasing pension coverage for those in the informal labor market Introducing a requirement that part of the retirement benefit from private pension arrangements be taken as an income stream Increasin

331、g the level of funded contributions,thereby increasing the level of assets over time Improving the governance requirements for the private pension system,including the need for minimum levels of funding in DB plans Improving the level of communication required to members from pension plansThe Mexica

332、n index value increased from 49.0 in 2021 to 56.1 in 2022,primarily due to higher net replacement rates and the revised scoring discussed in Chapter 3.Mercer CFA Institute Global Pension Index 20225505.A brief review of each system|The NetherlandsOverallindexRankAdequacysub-indexSustainabilitysub-in

333、dexIntegritysub-index33384.6Rank out of 44284.981.987.8The Netherlands retirement income system comprises a flat-rate public pension and quasi-mandatory earnings-related occupational pension schemes linked to industrial agreements.The overall index value for the Dutch system could be increased by:Reducing the level of household debt Increasing the labor force participation rate at older ages as li