Global Pension Index 2021: In its debut, Taiwan ranks fifth among Asian retirement systems


  • 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
  • A new entrant, Taiwan makes it into the top five among Asian retirement systems and 34th 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

Taiwan, October 19, 2021 – Taiwan is ranked fifth among Asian retirement systems and 34th globally in its debut on the 2021 Mercer CFA Institute Global Pension Index (MCGPI)[1], alongside other new entrants – Iceland, UAE and Uruguay. Into its 13th edition, the 2021 Global Pension Index reviews 43 retirement income systems across the globe based on three sub-indices (adequacy, sustainability and integrity).

 

Taiwan’s retirement system achieved an overall index value of 51.8. For each of the study’s three sub-indices, the system scored 69.3 for integrity, 51.9 for sustainability and 40.8 for adequacy. The integrity and sustainability scores for Taiwan were both higher than the Asia average of 63.8 and 48.4 respectively.

 

Overall, Taiwan is ranked 20th for the sustainability sub-index, which measures the likelihood of the system’s ability to provide benefits in the future; 28th for integrity, where factors which affect the citizens’ confidence level in the retirement system are considered; and 40th for the adequacy sub-index, which considers how the system is designed to provide adequate retirement benefits.

 

Relena Lin, Mercer’s Wealth Business Leader in Taiwan, said: “As a new entrant to the 2021 Global Pension Index, Taiwan’s scores are encouraging and demonstrate the potential for its system to evolve and grow further. The scores were well above the Asia average for integrity and sustainability, but below average for adequacy. There is opportunity for the system to improve its overall index value if the government can increase the minimum level of support for the poorest aged individuals, introduce a requirement that part of the retirement benefit must be taken as an income stream, and put new policies in place to encourage labor force participation at older ages.”

 

CFA Society Taiwan’s Vice President, Stan Lee, said: “For the long-term sustainability of the Taiwanese pension system, there is a need to account for longer life expectancies and ensure there are enough pension savings to see retirees through more years in retirement. Compounding the issue, the gender pension gap presents additional and urgent challenges, with women facing their retirement years with fewer benefits. With these concerns in mind, the promise of a secure retirement depends on policymakers and industry stakeholders taking collective action to examine the strengths and weaknesses of the pension system, with the purpose of delivering better retirement benefits to every individual.”

 

Taiwan got a C-grade in its first year, connoting a pension system that has some good features, but also major risks or shortcomings that should be addressed. It achieved the same grade as a number of Asian economies such as China, Indonesia and Malaysia.

 

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.

 

While Taiwan has made more significant improvements in the area of political empowerment, due to having a female president and more women in parliament, there is still a huge gender gap in labor force participation and pay. According to the Ministry of Labor, the labor force participation for women is 51.4% compared to 67.3% for men and women made 14.2% less than men in 2019. Although these gaps have narrowed over the past 10 years, it still affects the occupational pension benefits for women working in the private sector because contributions are tied to actual salary and not a salary cap.

 

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. 

CONTACT INFORMATION