The Melbourne Mercer Global Pension Index (MMGPI) has ranked India’s retirement income system the second-worst of 34 markets.
The index acknowledges that pension systems are developed under different social, cultural and economic dynamics, but stated that there are several similar features across the range that enable a comparison to be made.
The overall pension index is calculated using three sub-indices – namely Adequacy, Sustainability and Integrity – weighted towards the final result at 40%, 35% and 25%, respectively.
Improvements needed
India’s overall value for 2018 was 44.6 (out of 100) – a 0.3 point drop from the preceding year, primarily due to the index switching to using the average income earner rather than the median income earner in its calculations.
The Indian system was found to have an earnings-related employee scheme, a defined contribution fund, a defined benefit fund and a voluntary employer-managed fund.
However, the index noted a lack of minimum level support for the poor and a lack of minimum access age, as well as poor communication to members from pension arrangements and low levels of contributions from scheme members – all of which contributed to India being placed 33rd in the rankings.
The MMGPI found the worst country was Argentina (with a score of 39.2), while the Netherlands (80.3) and Denmark (80.2) claimed the top two places.
Japan, the Republic of Korea, China and Mexico received slightly higher scores than India, but were graded in the same classification range (D) – as needing several improvements to their systems to remain sustainable.
MMGPI is published annually by the Australian Centre for Financial Service.
