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 What is it?
How is it calculated?
Watch the vodcast
The Melbourne Mercer Global Pension Index is an exciting new initiative to compare pension systems around the world. Retirement income systems perform a critical role for both individuals and societies as countries grapple with the social and economic effects of ageing populations. There is no perfect system that can be applied universally around the world. Indeed, even comparing the diversity of retirement income systems is certain to be controversial as every system is different and has arisen from each country’s particular economic, social, cultural, political and historical circumstances. However there are certain features and characteristics of retirement income systems that are likely to lead to improved benefits, an increased likelihood of future sustainability of the system, and a greater level of confidence and trust within the community.
For the first time, the Melbourne Mercer Global Pension Index presents an approach to objectively compare the retirement income systems in eleven countries spread across the Americas, Europe and Asia Pacific. The countries included in this study are shown on the side bar where each country’s results are shown.
The results show that no country’s system has an index value above 80, which we consider represents an A-grade retirement income system. However, four countries have an index value between 65 and 80, which represents a B-grade system and — with some adjustments or improvements — these countries could be re-classified as A-grade systems. The following table summarises the classifications used.
| Grade |
Index value |
Description |
| A |
>80 |
A first class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity |
| B |
65–80 |
A system that has a sound structure, with many good features, but has some areas for improvement that differentiate it from an A-grade system. |
| C |
50–65 |
A system that has some good features, but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned. |
| D |
35–50 |
A system that has some desirable features, but also has major weaknesses and/or omissions that need to be addressed. Without these improvements, its efficacy and sustainability are in doubt. |
| E |
<35 |
A poor system that may be in the early stages of development or a non-existent system. |
The overall index value for each country represents the weighted average of the three sub-indices. The weightings used are:
- 40 percent for the adequacy sub-index
- 35 percent for the sustainability sub-index
- 25 percent for the integrity sub-index
The different weightings are used to reflect the primary importance of the adequacy sub-index which represents the benefits that are currently being provided together with some important benefit design features. The sustainability sub-index has a focus on the future and measures various indicators which will influence the likelihood that the current system will be able to be maintained in the future. The integrity sub-index has a focus on the private sector system and therefore has a more restrictive scope than the other two sub-indices.
The following diagram presents a high-level summary of the index.
The final chapter of the report makes several suggestions to improve each country’s retirement income system. Although each system reflects a unique history, there are some common themes as many countries face similar problems in the decades ahead. These common challenges include:
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Increasing the state pension age to reflect increasing life expectancy, both now and in the future
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Promoting higher labour force participation at older ages, particularly as many individuals now remain in good health for longer periods
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Encouraging higher levels of saving, both within the pension system and beyond
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Increasing the coverage of employees in the private pension system
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Promoting a diversity of retirement income products, including but not limited to annuities
Listen to Dr David Knox, Worldwide Partner in Mercer’s retirement, risk, and finance business, discuss the Melbourne Mercer Global Pension Index in this vodcast.
 Download vodcast (File size: 42MB)
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