Skip to main content

Sustainable pension systems: do they exist?

Can pension systems be sustainable? Do they exist? So called ‘first-pillar’ pension systems around the world have been put to the test by the Allianz Pension Sustainability Index (finchannel.com, April 7, 2014).


Over the last twenty years pension reforms have been introduced in various retirement schemes globally, differing from country to country. The Pension Sustainability Index (PSI) rates the pension schemes annually across countries, particularly in terms of long term sustainability in ageing societies. A good ranking does not mean generous pension payments. Rather, it shows that a country’s pension system will be able to cope with its demographics – an aging population.

In the current 2014 study, the pension systems of Thailand, Brazil, and Japan were found to be the least sustainable. The pension schemes of Australia, Sweden, and New Zealand were the most sustainable.


Thailand, for example, states the PSI report, has an extremely low retirement age, sporadic coverage, and the population is aging rapidly. Brazil is aging quickly too, and its pension system has a high replacement rate and early retirement options, placing it unsustainable in the long term. Japan has an unsustainable pension system due to its large population of older people and high sovereign debt level.

Australia has a two-tier pension system combining a lean public finance contribution with a highly developed funded pension, which does not place a heavy burden on the government. The western European countries whose pension systems were rated highly benefit from their comprehensive pension systems based on strong, funded pillars. The Netherlands surpassed Sweden and Norway on the rating component based on the country’s solid public finance situation, but overall Sweden placed highest. Norway’s high legal retirement age and moderate aging demographic helped it reach a high index score.

The PSI noted that Greece, which ranked worst of all countries in the 2011 PSI, improved in this 2014 study due to drastic reforms stipulated by the International Monetary Fund (IMF) and European Central Bank (ECB) austerity packages. It succeeded in cutting back on pension expenditures with lasting effect, but the high debt level and old age dependency ratio well above the European average remains a challenge for the Greek system. Greece jumped from last place on the index scale in 2011 to 8th from the bottom in 2014.

The report noted two main differences in pension systems: (1) countries such as the United Kingdom, the United States, Australia, and Ireland have developed a ‘bottom-drawer’ approach in which the government pension covers only the basic requirements to prevent old-age poverty, expecting the public to ‘top-up’ their own pension scheme if they expect additional income to maintain a certain standard of living, and (2) countries such as Italy, Spain, France, and Greece have a more generous government pension approach, which is good for people, but it may place more pressure on governments long term as more people age.

The top ranked 20 countries on the PSI include: Australia, Sweden, New Zealand, Norway, the Netherlands, Denmark, Switzerland, United States, Latvia, United Kingdom, Estonia, Canada, Finland, Russian Federation, Chile, Hong Kong, Luxembourg, Lithuania, Singapore, and Mexico.


The lowest ranked 20 countries on the PSI include: Belgium, Hungary, Turkey, Portugal, Slovak Republic, Indonesia, Taiwan, France, Italy, Spain, Cyprus, South Africa, Greece, Malta, China, Slovenia, India, Japan, Brazil, and Thailand.

http://projectm-online.com/research


Labels:

Comments

Post a Comment

Popular posts from this blog

2016 update on Rike Park, Tbilisi: from construction to busy park

From a flat patch of uninteresting dirt, Rike Park in Tbilisi, Georgia, has transformed in four years (from 2014-2016) into a busy park full of trees, flower beds, sculptures, fountains, and events. Rike (Rikhe) Park is on the left bank of the Mt’k’vari River (the Kura River) near the Old City of Tbilisi. The Peace Bridge links the right bank to Rike Park. Rike Park is below the hillside Presidential Palace and, via cable car, it is the starting point for the ride to Sololaki Ridge (with the Narikala Fortress and the Mother of Georgia statue). The glass box-shaped cable car terminus was opened on 23 June 2012, and since then the park has continually developed into a ‘people’s park’ where people can walk around, eat at the nearby restaurants, sit next to the statue of American president Ronald Reagan, climb the steps to Avlabari district, and access the sights of Meidan Square, the Peace Bridge, the Metekhi Church, the Old City, the waterfall, the sulphur baths, and t...
Post a Comment
Read more

Pir-E-Kamil - The Perfect Mentor by Umera Ahmed: book review

The Perfect Mentor pbuh  (2011) is set in Lahore and Islamabad in Pakistan. The novel commences with Imama Mubeen in medical university. She wants to be an eye specialist. Her parents have arranged for her to marry her first cousin Asjad. Salar Sikander, her neighbour, is 18 years old with an IQ of 150+ and a photographic memory. He has long hair tied in a ponytail. He imbibes alcohol, treats women disrespectfully and is generally a “weird chap” and a rude, belligerent teenager. In the past three years he has tried to commit suicide three times. He tries again. Imama and her brother, Waseem, answer the servant’s call to help Salar. They stop the bleeding from his wrist and save his life. Imama and Asjad have been engaged for three years, because she wants to finish her studies first. Imama is really delaying her marriage to Asjad because she loves Jalal Ansar. She proposes to him and he says yes. But he knows his parents won’t agree, nor will Imama’s parents. ...
1 comment
Read more

Hop on hop off bus tourism comes to Tbilisi, Georgia

City Sightseeing buses have arrived in Tbilisi. The iconic red double-decker buses, a feature of many cities around the world since the company was established in Seville, Spain in 1999, is now in six continents and almost 100 cities. The company established its Tbilisi business in November 2013, with its operations commencing in February 2014. The 90-minute tour stops at 11 major locations in Tbilisi (with 2 to 5 minute waiting times at each location): the Old City (where it commences), Freedom Square, Rose Revolution Square, Marjanishvili Square, the Dry Bridge, Konka, Avlabari, Metekhi, Akhundov Museum, the Sulfur Baths, and European Square. Passengers can hop off at any stop and see the sights, hopping back onto the next bus at any time. Alternatively, passengers can remain on the bus for the whole tour and take photographs when the bus stops at each location. There are one day (24-hour) passes (for 35 lari – about $20) and 48-hour passes for 55 lari, with family d...
2 comments
Read more