The Mercer CFA Institute Global Pension Index recently revealed the countries with the best and worst pensions in the world
With the growth and scale of pension fund assets amid the rise in global uncertainty, governments are now prompted to find methods where some of this capital can be directed into national priorities.
In the recently released Mercer CFA Institute Global Pension Index (MCGPI), which ranked the retirement income systems of 52 countries all over the world, the report explored possible ways governments can balance both the interests of those who participate in private pension plans as well as the priorities of the nation, as certain interventions may lead to unexpected consequences.
Mercer’s Global Defined Benefit/Defined Contribution Leader Christine Mahoney noted that while the pressure to adapt pension systems are placed on the government, pension reform is not simple.
“Assessing possible outcomes is essential, which is why employers, governments, and pension providers should all have a voice in shaping more resilient pension systems,” said Mahoney.
“Regulations and government actions — from tax policies to investment mandates — profoundly shape how pension funds can allocate capital,” said Margaret Franklin, CFA, president and CEO, CFA Institute.
“As some systems look to pension funds to drive investments that are considered in the national interest, the professional investment community must guard against the unintended consequences that may arise when mandates or restrictions distort the system,” added Franklin.
According to Tim Jenkins, the lead author of the report and a partner at Mercer, pension systems that had no or limited restrictions showed a tendency to have better rating in the MCGPI.
This suggested that in order to support sustainable retirement systems as well as economic growth, governments can shift their attention towards making investment options attractive, promoting transparency and sound governance, and fostering collaboration with the private sector.
“As the Index makes clear, the central purpose of pensions must remain to secure retirement income, guided by fiduciary duty above all else. Pension systems work best when they balance innovation and national priorities with the enduring responsibility to serve end-investors’ interests,” said Franklin.
The latest MCGPI found that the Netherlands, Iceland, Denmark, and Israel have all maintained an A grade for their retirement income systems. Singapore also received an A rating for the first time, being the only country in Asia that has done so.
