THE retirement system in Malaysia is ranked third in Asia and 23rd worldwide, despite a slight dip in the country’s overall index value to 59.6 this year from 60.1 last year, revealed the 13th annual Mercer CFA Institute Global Pension Index.

The index studies 43 retirement income systems around the world and measures each system through three weighted sub-indices – adequacy, integrity and sustainability. It also includes four new systems this year, namely Iceland, Taiwan, United Arab Emirates and Uruguay.

Of the three sub-indices measured in the 2021 Global Pension Index, Malaysia improved its adequacy score to 50.6. The country scored highest for integrity (76.8), followed by sustainability (57.5) and adequacy.

Malaysia is ranked 15th under the sustainability sub-index, which measures the likelihood of the ability of the retirement system to provide benefits in the future; 20th for integrity, which considers factors that affect the confidence of citizens in the system; and, 34th for adequacy, which considers how the system of the countries is designed to provide adequate retirement benefits.

Mercer’s wealth business leader for Asia, Janet Li, said: “It is encouraging that Malaysia continues to achieve scores that are well above the Asia average in each of the sub-indices.”

“As life expectancy continues to rise, its government can look at ways to increase the minimum level of support for the poorest retirees and the labour force participation rate, especially at older ages.

“If the country can raise the level of household savings and lower the level of household debt, it will boost both the adequacy and sustainability scores, and eventually, the overall index value for its retirement system.”

However, CFA Society Malaysia president Justin Ong said, “The ongoing Covid-19 pandemic has made it even harder for Malaysians to peacefully retire.”

“Less-for-more is a global trend, where low interest rates and an increasing life expectancy have put unprecedented pressure on public and private pension systems around the world.

“In Malaysia, the issue is further exacerbated by inadequate financial literacy among Malaysians.”

Malaysia went from a C+ to a C rating this year, connoting a pension system that has some good features, but also major risks or shortcomings that should be addressed. Its system achieved the same grade as other Asian economies like China, Indonesia and Taiwan.

The 2021 Global Pension Index also found that the retirement systems in Asia continue to lag behind their counterparts worldwide. The Asia overall index value average is 52.2, against a global average of 61.

Globally, Iceland’s retirement income system (84.2) has been named the best in the world in its debut, closely followed by the Netherlands (83.5) and Denmark (82). – Bernama, October 19, 2021.