CPF’s score plunges in global pension index amid mounting adequacy concerns

Non-residents should have CPF too, policymakers told.

Singapore’s Central Provident Fund (CPF) recorded the greatest downward movement in the 2014 edition of the Melbourne Mercer Global Pension Index, a report released yearly by the Australian Centre for Financial Studies and Mercer.

The report tracks pension systems across the world. Although the CPF remains Asia’s best, Singapore’s overall index value still slid by 7.7%, on the back of a 3% decline in the adequacy sub-index.

The adequacy sub-index represents “the benefits that are currently being provided together with some important benefit design features”. Singapore received a score of 56.4% in this sub-index, down from 59.0% in 2013 and well below the global average of 62.0%.

Singapore received an overall grade of 65.9%, just barely making the cut to receive an overall ‘B’ grade. This grade is given to a system that has “sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system.”

According to the report, the overall index value for the Singaporean system could be increased b increasing the minimum level of support for the poorest aged individuals and reducing the barriers to establishing tax-approved group corporate retirement plans.

The CPF should also be opened to non-residents, who comprise more than one-third of the labour force. The labor force participation rate at older ages should also be increased. 

Other countries that received a ‘B’ grade are Finland, Switzerland, Sweden, Canada, Chile, and the UK. Australia and the Netherlands received ‘B+’ grades, while Denmark was the only country to receive a grade of ‘A’.

To Singapore’s credit, other Asian countries received a grade of ‘D’. These countries are China, Indonesia, Japan, Korea, India.