GLOBAL -The Greek pension system was ranked the worst in a new study because of its acute sovereign debt and overly generous promises, while Australia was found to have the most sustainable system.
The Pensions Sustainability Index (PSI) produced by Allianz Global Investors (AllianzGI) analyses the current and future prospects of national pension systems in 44 countries around the world. The index examines relevant elements of pension systems such as demographic developments, public finances and pension system design to capture in one figure the need for further pension reform.
Greece was found to be under the most pressure to reform, with a pension system that is "buckling under its sovereign debt crisis." Greece was ranked the worst despite pension reforms initiated as conditions of austerity packages issued by the International Monetary Fund (IMF) and the European Central Bank (ECB). Greek's old age dependency ratio (the ratio of elderly people to people of working age) is also well above European average.
AllianzGI head of international pensions, Brigitte Miksa said: "While pension reform has been at the top of the political agenda across the globe for many years now, the progress of reform itself differs considerably from country to country, hence the need for an Index to show at a glance how countries compare."
"In this current study, Greece, India, China and Thailand show the greatest need for pension reform, although not due to a common cause."
Extremely low coverage is the main challenge to India's pension policy, with only 12% of the population is covered by any type of formal pension arrangement. China and Thailand are also under pressure to reform due to low coverage. Thailand's pension system is also suffering from an extremely low legal retirement age (55 years).
Emerging markets in Asia were also found to be facing major structural changes. Strong economic growth has led to a prosperous middle-class in the region, however increased urbanisation and a breakdown in traditional family structures have caused extreme socio-economic changes which the report said is altering the retirement landscape.
Comprehensive pension systems are the exception and not the rule in most of Asia according to the report and increasing the coverage of the public pension system is a challenge. Many Asian governments are beginning to implement a multi-pillar system by introducing a variety of funded pensions.
Australia's two-tier system of lean public and highly developed funded pensions puts it under the least pressure to reform, the report said. Australia is followed in order by Sweden, Denmark, New Zealand and the Netherlands.
Other trends included an ongoing shift from pay as you go systems to funded systems, a move from defined benefit to defined contribution systems and a rise in more formalised public systems over family support structures worldwide.
An innovative funding structure has been agreed for Croydon Pension Fund. However, there are some concerns about the arrangement. Stephanie Baxter reports
Some 52% of red flags raised by schemes on suspected scam pension transfers involve advisers or unregulated introducers, a report by the Pension Scams Industry Group (PSIG) has claimed.
In this week's Pensions Buzz, we want to know whether bosses should have to pay into the same staff DB scheme as their workers rather than their own executive pension fund.
The Norfolk Pension Fund has been successful as the lead plaintiff in a class action case that went to jury trial in California involving securities fraud.