Mercer CFA Institute Global Pension Index calls for increased KiwiSaver contributions 

New Zealand, October 11, 2022

• Mercer CFA Institute Global Pension Index sees New Zealand ranked 15th for second consecutive year
• Index compares 44 retirement income systems, covering two-thirds of world’s population
• Mercer recommends increased contributions to KiwiSaver and a focus on the long-term

New Zealand’s retirement income system has been ranked 15th for the second consecutive year in the 14th annual Mercer CFA Institute Global Pension Index (MCGPI).

The MCGPI is a comprehensive study of global pension systems, accounting for almost two-thirds (65 per cent) of the world’s population. It benchmarks 44 retirement income systems around the world, highlighting strengths and shortcomings in each system, and suggesting possible areas of reform to provide more adequate and sustainable retirement benefits.

New Zealand’s retirement income system again received a B grade, while the top three systems (also unchanged from 2021) – Iceland, the Netherlands, and Denmark – were found to be sustainable and well-governed systems, earning them an A-grade.

Dr. David Knox, Senior Partner at Mercer and lead author of the study, highlighted the importance of strong retirement schemes globally in light of growing economic uncertainty, and amongst other recommendations, called for New Zealand to increase KiwiSaver contributions.

“As the KiwiSaver system matures, New Zealanders continue to assume more responsibility for their retirement savings in increasingly complex and volatile global and local environments,” said Dr. Knox.

“This needs to be supported by policy that encourages increased KiwiSaver contributions, in a system that allows New Zealanders to proactively plan for and take ownership of their individual financial security and quality of life in retirement.”

Dr Jeffrey Stangl, Executive Director of CFA Society New Zealand, highlighted the need for sensible decision making in the wake of increased market volatility and the uncertain investment environment.

“While the rapid shift in the macroeconomic and geopolitical environment has been felt directly by New Zealanders and especially retirees with fixed income exposure, it's important to maintain a focus on the long term,” Dr Stangl said.

“CFA Institute and CFA Society New Zealand are committed to assisting investment professionals navigate the challenging investing environment and improve financial outcomes for retirees,” he said.

Reflecting on the survey, Martin Lewington, CEO for Mercer New Zealand noted that the KiwiSaver scheme must ensure it adequately focuses on educating New Zealanders about how to manage and use their retirement savings when they retire, not just on accumulation.

“It’s one thing to accumulate the capital for retirement, but it’s another to manage this responsibly and in a way that allows the individual to maintain their lifestyle and standard of living with dignity after they leave the workforce,” Mr. Lewington said.

“This necessity to place increased focus on managing and spending in retirement isn’t unique to New Zealand. Globally, there is a risk that if those in retirement don’t spend, the economy will shrink and on an individual level, people will negatively impact their own quality of life having worked their whole lives to achieve just the opposite,” he added.

Mr. Lewington acknowledged that this will require time and an investment in education across the community, with cohesive information provided to members in a format which is easy to access and understand, and which manages their expectations about the retirement savings they will have and how it can be responsibly managed when they retire.

“While the shift in focus won’t happen overnight, it needs to start now so that current retirees can more effectively manage their retirement savings. And, for those approaching retirement, they can transition with confidence and a clear view on how they will use their retirement to serve their individual needs and wants.

“Above all, KiwiSaver should be fair and equitable to all, and provide the opportunity for all New Zealanders to shape and fulfil their retirement goals for years to come.”

New Zealand achieved an index value of 68.8 overall, 64.0 for adequacy, 64.7 for sustainability and 82.1 for integrity.

Iceland had the highest overall index value (84.7), closely followed by the Netherlands (84.6) and Denmark (82.0). Thailand had the lowest index value (41.7).

The Index uses the weighted average of the sub-indices of adequacy, sustainability, and integrity. For each sub-index, the systems with the highest values were Iceland for adequacy (85.8) and sustainability (83.8), and Finland for integrity (93.3). The systems with the lowest values across the sub-indices were India for adequacy (37.6), Austria for sustainability (22.7), and the Philippines for integrity (30.0).

In comparison to 2021, Mexico showed the most improvement as a result of pension reform, which improved outcomes for individuals and pension regulation. 

2022 Mercer CFA Institute Global Pension Index

 

System	Overall Grade	Overall Score	Adequacy	Sustainability	Integrity
Iceland	A	84.7	85.8	83.8	84.4
Netherlands	A	84.6	84.9	81.9	87.8
Denmark	A	82.0	81.4	82.5	82.1
Israel	B+	79.8	75.7	81.9	83.2
Finland	B+	77.2	77.5	65.3	93.3
Australia	B+	76.8	70.2	77.2	86.8
Norway	B+	75.3	79.0	60.4	90.3
Sweden	B	74.6	70.6	75.7	79.5
Singapore	B	74.1	77.3	65.4	81.0
UK	B	73.7	76.5	63.9	83.0
Switzerland	B	72.3	68.7	70.5	80.7
Uruguay	B	71.5	84.5	50.6	79.8
Canada	B	70.6	70.8	64.7	78.6
Ireland	B	70.0	75.9	53.5	83.7
New Zealand	B	68.8	64.0	64.7	82.1
Chile	B	68.3	60.0	70.3	78.9
Germany	B	67.9	80.5	44.3	80.9
Belgium	B	67.9	80.8	39.1	87.5
Hong Kong SAR	C+	64.7	61.5	52.1	87.6
USA	C+	63.9	67.5	61.2	61.7
Colombia	C+	63.2	65.2	55.3	71.3
France	C+	63.2	84.6	40.9	60.1
Malaysia	C+	63.1	57.2	60.2	76.9
Portugal	C+	62.8	84.9	29.7	73.9
UAE	C+	61.8	63.8	51.9	72.6
Spain	C+	61.8	80.0	28.7	78.9
Saudi Arabia	C	59.2	61.4	54.3	62.5
Poland	C	57.5	59.5	45.4	71.2
Mexico	C	56.1	63.1	57.1	43.6
Peru	C	55.8	54.7	51.5	63.7
Brazil	C	55.8	71.1	27.8	70.5
Italy	C	55.7	72.3	23.1	74.7
Austria	C	55.0	69.8	22.7	76.5
South Africa	C	54.7	44.2	49.7	78.4
Japan	C	54.5	58.0	44.5	63.0
China	C	54.5	64.4	39.3	60.0
Taiwan	C	52.9	42.0	53.2	69.8
Korea	C	51.1	40.1	54.9	63.5
Indonesia	D	49.2	39.3	44.5	71.5
Turkey	D	45.3	45.6	29.8	66.6
India	D	44.4	37.6	40.7	60.4
Argentina	D	43.3	55.6	29.4	42.9
Philippines	D	42.0	40.5	52.3	30.0
Thailand	D	41.7	41.3	36.4	50.0

                                                            -        ENDS        -

The MCGPI 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.

This year, the Global Pension Index compares 44 retirement income systems across the globe and covers 65 percent of the world’s population. The 2022 Global Pension index includes one new retirement income system – Portugal.

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.

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.

For more information about the Mercer CFA Institute Global Pension Index, click here.

 

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 behaviour 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 190,000 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.

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.

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