India is the fifth worst country in providing pension to its aging population

By Rajiv Shah 

Last year, e-journal “Visual Capitalist” ranked about 36 countries on how they were doing insofar as providing pension to their population is concerned. The ranking suggested that India is the fifth worst country in providing pension to its aging population. 

Titled "Ranked: The best and worst pension plans, by country", and authored by Carmen Ang, other countries that rank worse than India are Mexico, the Philippines, Turkey and Argentina. The Netherlands ranks the best, followed by Denmark, Australia, Finland and Sweden.

This is what the article says:

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The global population is aging—by 2050, one in six people will be over the age of 65.
As our aging population nears retirement and gets closer to cashing in their pensions, countries need to ensure their pension systems can withstand the extra strain.
This graphic uses data from the Melbourne Mercer Global Pension Index (MMGPI) to showcase which countries are best equipped to support their older citizens, and which ones aren’t.

The Breakdown

Each country’s pension system has been shaped by its own economic and historical context. This makes it difficult to draw precise comparisons between countries—yet there are certain universal elements that typically lead to adequate and stable support for older citizens.

Adequacy: The base-level of income, as well as the design of a region’s private pension system.
Sustainability: The state pension age, the level of advanced funding from government, and the level of government debt.
Integrity: Regulations and governance put in place to protect plan members.
These three measures were used to rank the pension system of 36 different countries, representing over 63% of the world’s population.
Here’s how each country ranked:

Ireland took first place for adequacy, but scored relatively low on the sustainability front at 27th place. This can be partly explained by Ireland’s low level of occupational coverage. The country also has a rapidly aging population, which skews the ratio of workers to retirees. By 2050, Ireland’s worker to retiree ratio is estimated to go from 5:1 to 2:1.
Similar to Ireland, Spain ranks high in adequacy but places extremely low in sustainability.
There are several possible explanations for this—while occupational pension schemes exist, they are optional and participation is low. Spain also has a low fertility rate, which means their worker-to-retiree ratio is expected to decrease.

Steps Towards a Better System

All countries have room for improvement—even the highest-ranking ones. Some general recommendations from MMGPI on how to build a better pension system include:

• Increasing the age of retirement: Helps maintain a more balanced worker-to-retiree ratio.
• Enforcing mandatory occupational schemes: Makes employers obligated to provide pension plans for their employees.
• Limiting access to benefits: Prevents people from dipping into their savings preemptively, thus preserving funds until retirement.
• Establishing strong pension assets to fund future liabilities: Ideally, these assets are more than 100% of a country’s GDP.

Pension systems across the globe are under an increasing amount of pressure. It’s time for countries to take a hard look at their pension systems to make sure they’re ready to support their aging population.