The pressure on nations worldwide to reform their pension systems varies significantly. Different economic and demographic environments make it difficult to compare past structural changes as well as the need to improve in the near future.

A unique study by Allianz Global Investors (AllianzGI), one of the world’s largest asset management companies, now offers readers the chance to compare 37 countries at a glance.

“The Pension Sustainability Index is a tool that helps track changes made to pension systems in different countries around the world,” says Dr. Renate Finke, author of the Pension Sustainability Index 2009 report.

With an Index of 7.6, India has the most urgent need to reform. Pension coverage in the subcontinent is still poor with only 12% of the population having formal arrangements for retirement.
China (6.8) and Thailand (6.4), which are second and fourth to India, find themselves in a similar situation. The fact that Thais can legally retire as early as 55 puts significant additional pressure on the state’s pension system.
With an index of 6.6, Greece is the third-most-pressured country and tops the list among European nations.

“The Greek economy will be unable to sustain its still-generous social security system and high replacement rates much longer,” says Finke. And even though the country is facing high old-age-dependency ratios, it has not yet initiated an adequate reform. “Greece’s funded systems are in their infancy at best,” she says. 

At the other end of the scale, Australia (2.3) received the lowest index score, which shows that the country is well prepared for the future. This is largely due to the fact that the overall structures of the country’s old age provisioning systems, like those in Hong Kong, are quite balanced even though Australia’s funded systems have experienced setbacks.

The effects of the financial crisis on the country means this year’s score is slightly worse than in previous rankings. Sweden (2.6), Hong Kong (2.9) and Denmark (3.2) come in second, third and fourth best. “All of these countries have managed to establish comprehensive pension systems based on strong funded pillars,” says Finke.

Germany (4.2) ranks in the middle. The US as well as Ireland and Britain have been hit hard by the financial crisis in their funded pillars such as pension funds and defined-contribution plans, which were strongly invested in stocks. The corresponding variables of the Index and the countries’ overall scores deteriorated accordingly.

The next Eurovision Song Contest will be held in Oslo in May 2010. Changes in pension systems do not occur as regularly, but the Pension Sustainability Index will make them transparent once they do happen.