India’s Retirement System Ranks Last in the Global Pension Index
India’s Retirement System Ranks Last in the Global Pension Index – All the 11 countries, that have been part of the MMGPI since it began in 2009, have experienced an increase in the expected length of retirement from 2009 to 2015, with the average length rising from 16.6 years to 18.4 years.
The Indian retirement system has been ranked last in the global pension index, according to a Mercer report. Denmark has been rated as the country with the best retirement system globally, while Australia, Germany, Japan, Singapore and the UK have increased their pension age to offset the increase in life expectancies.
The Index is used internationally both to highlight the relative strengths of pension systems and to identify opportunities and options for improvement. Author of the report and senior partner at Mercer, David Knox, said, “Implementing the right reforms to improve pension systems and provide financial security in retirement has never been more critical for both individuals and societies.”
The country’s index value fell from 43.5 in 2014 to 40.3 in 2015, primarily due to a recent review conducted by the economic intelligence unit that showed a material reduction in its household savings rate, Melbourne Mercer Global Pension Index (MMGPI) report said.
Enhanced participation in the National Pension System will help the country increase its index value, it added.
Denmark has been rated as the country with the best retirement system in the world. Australia, Germany, Japan, Singapore and the UK have increased their pension age to offset the increase in life expectancies.
Now in its seventh year, the MMGPI measured 25 retirement income systems against more than 40 indicators, under the sub-indices of adequacy, sustainability and integrity.
The report covers close to 60% of the world’s population and suggests how governments can provide adequate and sustainable benefits that protect their citizens, against longevity risk.
The report rated Denmark as the country with the best retirement system for the fourth consecutive year in 2015, with an overall score of 81.7. However, it said that the Indian retirement system continues to rank last.
“The NPS is gradually gaining popularity in India. Continuing to improve education and communication will help increase coverage of pension arrangements for the working population in the organised sector, particularly popularising the corporate model of NPS among Indian employers,” Anil Lobo, India Business Leader for Retirement, Mercer India, said in a statement.
“The government’s recent initiative, giving thrust to the participation of individuals from the unorganised sector by launching the Atal Pension Yojana (APY) in June, should encourage workers in the unorganised sector to voluntarily save for retirement,” he said.
“This should give impetus to individuals to join the NPS scheme, thereby helping enhance coverage, adequacy and sustainability of the country’s overall retirement system and this should help increase India’s index value in the future,” he added.
All the 11 countries, that have been part of the MMGPI since it began in 2009, have experienced an increase in the expected length of retirement from 2009 to 2015, with the average length rising from 16.6 years to 18.4 years.
Suggested measures to improve India’s system include introducing a minimum level of support for the poorest aged individuals, increasing coverage of pension arrangements for the unorganised working class, introducing minimum access age so that it is clear that benefits are preserved for retirement purposes, and improving the regulatory requirements for the private pension system.
Source: Business Standard