The Mercer CFA Institute Global Pension Index 2020 has ranked Malaysia’s retirement system as the third best in Asia, and the 19th out of 39 systems. This comes following the reveal that the country’s overall index value now stands at 60.1.
The index placed Malaysia – along with UK, Belgium, Hong Kong, the US, and France – in the Grade C+ band, out of a grade continuum of between A to E. For context, both the Grade C and C+ bands are used to describe “a system that has some good features, but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned.”
The index also observed that Malaysia’s overall index value has dropped slightly since 2019, dipping from its previous score of 60.6. This is attributed to several small changes in the sustainability sub-index, which measures the likelihood of a system being able to provide benefits into the future.
The sustainability sub-index is one of the three sub-indices that are used in the study to measure each country’s retirement system. The other two sub-indices are the adequacy sub-index – which covers factors such as regulation, governance, communication, and operating costs – and the integrity sub-index, which considers aspects including the benefits, system design, levels of savings, and home ownership.
“Of the study’s three sub-indices, Malaysia scored highest for integrity (78), followed by sustainability (58.6), and adequacy (50.1). The global average sits at 71.3 for integrity, 50 for sustainability, and 60.8 for adequacy,” said Mercer in a statement.
The index further clarified Malaysia’s retirement income system is primarily based on the Employees Provident Fund (EPF), which covers employees from the private sector and non-pensionable employees from the public sector. It also noted that Malaysia’s overall index value can be increased with some improvements, including increasing the minimum level of support for the poorest aged individuals and increasing the pension age as life expectancy continues to rise.
Meanwhile, Singapore retains its position as the best retirement system in Asia, with an overall index value of 71.2, followed by Hong Kong with 61.1 in the second spot.
The Mercer CFA Institute Global Pension Index, which is currently in its 12th year running, offers insights into 39 retirement income systems globally. It covers almost two-thirds of the world’s population.