Report: Greece Desperate for Pension Reform While Australia Triumphs

(November 7, 2011) — Greece is under the most pressure in regards to pension reform, according to the Pension Sustainability Index — produced by Allianz Global Investors (AllianzGI), one of the world’s largest asset management companies.

“Despite pension reforms initiated as a condition of the austerity packages from the International Monetary Fund (IMF) and European Central Bank (ECB), the retirement age in Greece is still low and public replacement rates (the percentage of a worker’s pre-retirement income paid out by the pension system upon retirement) are too high,” a release on the results stated. “However, the greatest challenge facing the Greek pension system is that its old age dependency ratio – the ratio of elderly people to people of working age – is well above the European average.”

The study demonstrated that along with Greece, countries including India, China, and Thailand also showed the greatest need for pension reform, though for different reasons. Increased levels of sovereign debt following the financial crisis have exacerbated the need for reform in many countries, according to AllianzGI. 

In contrast, Australia ranked as having the most pristine pension system, followed by Sweden, Denmark, New Zealand, and the Netherlands.

“While pension reform has been at the top of the political agenda across the globe for many years now, the progress of reform itself differs considerably from country to country, hence the need for an Index to show at a glance how countries compare,” commented Brigitte Miksa, Head of International Pensions at AllianzGI. “In this current study, Greece, India, China and Thailand show the greatest need for pension reform, although not due to a common cause. At the heart of Greece’s deteriorating ranking are acute sovereign debt, a quite serious aging problem and a pension system which remains generous despite recent reforms.”

The findings by AllianzGI follow a similar report by consulting firm Mercer. The Melbourne Mercer Global Pension Index — which includes 16 countries and 50% of the world population — found last month that the Netherlands, Australia, and Switzerland held the top three spots in the ranking, while the United States ranked in 10th place.

The following list summarizes Mercer’s results in order of strongest to weakest pension systems: 1) Netherlands, 2) Australia, 3) Switzerland, 4) Sweden, 5) Canada, 6) UK, 7) Chile, 8) Poland, 9) Brazil, 10) United States, 11) Singapore, 12) France, 13) Germany, 14) Japan, 15) India, and 16) China.

“The best pension systems adopt a multi-pillar approach to spread these long term risks between governments, employers and individuals. Such an approach is also particularly relevant in periods of economic uncertainty, as we are now facing,” said Mercer Senior Partner and author of the report, Dr. David Knox, adding that in uncertain economic times, the risk of governments not being able to financially support their aging population is becoming more of a reality unless some significant and immediate pension reform is made.