Global Pension Index 2021: Dip in household savings sees slight decrease in Thailand’s overall index value


  • Asia’s retirement systems continue to lag the world’s as the overall index value average of 52.2 trails the global average of 61
  • Thailand retains its D-grade with an overall index value of 40.6, the lowest index value globally
  • Iceland named the world’s best in its debut, closely followed by the Netherlands and Denmark
  • Urgent reform needed as pandemic widens gender pension gap in Asia and the world

Thailand, November 9, 2021 – The overall index value for Thailand’s retirement system dipped slightly from 40.8 in 2020 to 40.6 in 2021, according to the 2021 Mercer CFA Institute Global Pension Index (MCGPI)[1]. Into its 13th edition, the 2021 Global Pension Index measures 43 retirement income systems across the globe through three weighted sub-indices (adequacy, sustainability and integrity) and includes four new systems – Iceland, Taiwan, UAE and Uruguay. Thailand is ranked 43rd in this year’s study, with the lowest index value globally.

 

The slight decrease in Thailand’s overall index value was primarily due to a decline in the country’s household savings rate. However, this year saw an increase in the integrity sub-index score, which improved 2.7 points from 47.3 in 2020 to 50 in 2021. Thailand’s integrity score was also the highest across each of the sub-indices measured, followed by sustainability (40) and adequacy (35.2).

 

Overall, Thailand is ranked 35th for the sustainability sub-index, which measures the likelihood of the Thai system’s ability to provide benefits in the future; 39th for integrity, where factors which affect the citizens’ confidence level in the system are considered; and 42nd for the adequacy sub-index, which considers how the country’s system is designed to provide adequate retirement benefits.

 

Kasin Sutuntivorakoon, Mercer’s Wealth Business Leader in Thailand, said: “The government and regulators, as seen by the proposed establishment of the National Pension Fund (“NPF”) and the pending Provident Fund reform measures, have been commendable in taking active steps to tackle Thailand’s issues with our aging population and relative lack of retirement savings. While the approval of the NPF could plug some gaps, the timeline of enactment remains unclear. In the short run, Thailand can do more to improve the overall index value by enhancing governance measures and expanding investments in growth assets. In the long run, the system would benefit from areas such as innovative investment designs, integrated mortality pooling solutions, retirement income programs, and enhancement of user experience.”

 

Mary Leung, CFA, Head, Advocacy, Asia Pacific, at CFA Institute, said, “While Asia has fared relatively well compared with most other regions during COVID-19, there is no market in Asia that doesn’t need urgent pension reforms. We have been operating in an extremely challenging environment with historically low interest rates and, in some cases, negative yields clearly impacting returns. Policymakers and industry stakeholders must take collective action to ensure the adequacy and sustainability of retirement benefits.”

 

Thailand retained its D-grade, connoting a pension system that has some desirable features but its efficacy and sustainability are in doubt if major weaknesses or omissions are not addressed. The Thai system was awarded the same grade as a number of Asian countries like India, Japan, South Korea and the Philippines.

 

The 2021 Global Pension Index also found that Asia’s retirement systems continue to lag the world’s. Asia’s overall index value average was 52.2, against a global average of 61.

 

Globally, Iceland’s retirement income system (84.2) has been named the world’s best in its debut, closely followed by the Netherlands (83.5) and Denmark (82). For each sub-index, the systems with the highest values were Iceland for adequacy (82.7), Iceland for sustainability (84.6) and Finland for integrity (93.1). The systems with the lowest values across the sub-indices were India for adequacy (33.5), Italy for sustainability (21.3) and the Philippines for integrity (35.0).

 

Gender differences in pension outcomes

 

This year’s study also underscored the need for urgent reform to reduce the gender pension gap – an issue inherent in every system.

 

Across the Organisation for Economic Co-operation and Development (OECD) member countries, the gender pension gap or difference in retirement income that men and women receive, averages 26%, with the gap ranging from 3% in Estonia to 50% in Japan[2]. The MCGPI’s analysis highlighted that the causes of the gender pension gap are multifold with employment-related, pension design and socio-cultural issues contributing to women being far more disadvantaged than men when it comes to retirement income.

 

In Thailand, women face educational inequalities prior to entering the workforce and also experience employment inequalities in the workplace, from unequal pay to unequal opportunity. According to the 2020 UNDP Human Development Report, Thailand ranked 80th out of 189 countries in the Gender Inequality Index, where only 14% of parliamentary seats are held by women, and only 43.5% of women had received secondary education compared to the 48.6% of men.

 

While employment issues are major contributors and are well known – more female part-time workers, periods out of the workforce for caring responsibilities and lower average salaries, for example – the 2021 Global Pension Index found that pension design flaws were aggravating the issue. This includes non-mandatory accrual of pension benefits during parental leave, absence of pension credits while caring for young children or elderly parents in most systems, and the lack of indexation of pensions during retirement, which have a larger impact on women due to longer life expectancy.

 

Janet Li, Mercer’s Wealth Business Leader for Asia, said, “Closing the gender pension gap needs to be a multi-stakeholder undertaking, from employers playing an active role to ensure gender equity in pay, to individuals taking initiatives improving their financial literacy. Our study shows that failure to address the gender retirement savings gap will have long-term costs for businesses, particularly in their ability to attract and retain talent, as well as for society. We need to act now and urgently.

 

“The pension industry can take the lead by removing eligibility restrictions for individuals to join employment-related pension arrangements. This could be expanded to include part-time or informal workers who represent a large population of working women in Asia. Credits for those caring for the young and the old could also be introduced to ensure that individuals who have had to take time out of the formal workforce due to caregiving responsibilities are not left behind.”

 

 

[1] The MCGPI is a comprehensive study of global pension systems, accounting for two-thirds (65 per cent) of the world’s population. It benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits

[2] Towards Improved Retirement Savings Outcomes for Women, March 2021, OECD

2021 Mercer CFA Institute Global Pension Index

System

Overall index value

Sub-index values

Adequacy

Sustainability

Integrity

 Argentina (42)

41.5

52.7

27.7

43.0

 Australia (6)

75.0

67.4

75.7

86.3

 Austria (33)

53.0

65.3

23.5

74.5

 Belgium (17)

64.5

74.9

36.3

87.4

 Brazil (30)

54.7

71.2

24.1

71.2

 Canada (12)

69.8

69.0

65.7

76.7

 Chile (16)

67.0

57.6

68.8

79.3

 China (28)

55.1

62.6

43.5

59.4

 Colombia (25)

58.4

62.0

46.2

69.8

 Denmark (3)

82.0

81.1

83.5

81.4

 Finland (7)

73.3

71.4

61.5

93.1

 France (21)

60.5

79.1

41.8

56.8

 Germany (14)

67.9

79.3

45.4

81.2

 Hong Kong SAR (18)

61.8

55.1

51.1

87.7

 Iceland (1)

84.2

82.7

84.6

86.0

 India (40)

43.3

33.5

41.8

61.0

 Indonesia (35)

50.4

44.7

43.6

69.2

 Ireland (13)

68.3

78.0

47.4

82.1

 Israel (4)

77.1

73.6

76.1

83.9

 Italy (32)

53.4

68.2

21.3

74.9

 Japan (36)

49.8

52.9

37.5

61.9

 Korea (38)

48.3

43.4

52.7

50.0

 Malaysia (23)

59.6

50.6

57.5

76.8

 Mexico (37)

49.0

47.3

54.7

43.8

 Netherlands (2)

83.5

82.3

81.6

87.9

 New Zealand (15)

67.4

61.8

62.5

83.2

 Norway (5)

75.2

81.2

57.4

90.2

 Peru (29)

55.0

58.8

44.2

64.1

 Philippines (41)

42.7

38.9

52.5

35.0

 Poland (27)

55.2

60.9

41.3

65.6

 Saudi Arabia (26)

58.1

61.7

50.9

62.5

 Singapore (10)

70.7

73.5

59.8

81.5

 South Africa (31)

53.6

44.3

46.5

78.5

 Spain (24)

58.6

72.9

28.1

78.3

 Sweden (8)

72.9

67.8

73.7

80.0

 Switzerland (11)

70.0

65.4

67.2

81.3

 Taiwan (34)

51.8

40.8

51.9

69.3

 Thailand (43)

40.6

35.2

40.0

50.0

 Turkey (39)

45.8

47.7

28.6

66.7

 UAE (22)

59.6

59.7

50.2

72.6

 UK (9)

71.6

73.9

59.8

84.4

 Uruguay (20)

60.7

62.1

49.2

74.4

 USA (19)

61.4

60.9

63.6

59.2

Average

61.0

62.2

51.7

72.1

 


About the Mercer CFA Institute Global Pension Index

The Global Pension Index benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.

 

The Global Pension Index is a collaborative research project sponsored by CFA Institute, the global association of investment professionals, in collaboration with the Monash Centre for Financial Studies (MCFS), part of Monash Business School at Monash University, and Mercer, a global leader in redefining the world of work and reshaping retirement and investment outcomes.

 

This year, the Global Pension Index compares 43 retirement income systems across the globe and covers two-thirds (65 per cent) of the world’s population. The 2021 Global Pension Index includes four new systems – Iceland, Taiwan, UAE and Uruguay.

 

The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against more than 50 indicators.

 

For more information about the Mercer CFA Institute Global Pension Index, click here.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 78,000 colleagues and annual revenue of over $18 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

About CFA Institute 

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 175,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide and there are 160 local societies. For more information, visit www.cfainstitute.org or follow us on Linkedin and Twitter at @CFAInstitute

About the Monash Centre for Financial Studies (MCFS)

A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption. 

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