The results of the 'Global Pension Index Report', prepared in collaboration with Mercer, CFA Institute and Monash Financial Research Center (MCFS), have been announced. Iceland, which joined the list for the first time this year, became the country with the best pension system, while the Netherlands was the second and Denmark was the third of the countries that have shared the top two places for 10 years. According to the Global Pension Index Report, pension systems need to be reformed to close gender-related differences in retirement income. Turkey, which took the third place in the research this year, ranks 39th. 

Mercer which provides human resources management consultancy services in Turkey on talent management, assessment and evaluation, employee engagement and experience, wage research, mobile workforce (expat) management consultancy, fringe benefits and flexible fringe benefits consultancy, individual pension plans and actuarial valuation, shared the results of the ‘Global Pension Index’. According to the results of the index, which was held for the 13th time this year; it is pointed out that although there are significant differences in the level of retirement income between the sexes in all regions, the difference in retirement income between the sexes cannot be explained by a single reason. 

According to the ‘Global Pension Index', in which a total of 43 pension systems were evaluated within the framework of more than 50 indicators, Iceland was the country with the highest index value with 84.2 percent, while Thailand was the country with the lowest value with 40.6 percent. Of the countries that have shared the top two places for 10 years, the Netherlands ranked second with 83.5 percent this year and Denmark ranked third with 82 percent. According to a study conducted in 2020, China and the United Kingdom became the most developed countries as a result of pension reform. Turkey, which took the third place in the study with its rapidly developing pension system, ranked 39th.  

Dr. David Knox, Mercer's Senior Partner and the lead author of the study, stated that it is imperative that participants in the pension industry take immediate action and said: “The governments of many countries around the world have responded to COVID-19 with large-scale economic incentives that have been added to government debt and reduced the opportunity for governments to support their elderly populations.   Global pension plans are shifting away from traditional defined benefit plans towards plans that target savings. Despite the difficulties, it's time to actually accelerate pension reform, not to curb it. Individuals are increasingly forced to take responsibility for their own retirement income, and they need strong regulations and management to be supported and protected.”

Dr. David Knox highlighted that Although there are significant differences in the level of retirement income between the genders, the difference in retirement income between the genders cannot be explained by a single reason and said: “The reasons for the gender retirement income gap are mixed and varied. The pension design and socio-cultural problems related to employment in each country and region cause women to be much more disadvantaged than men in terms of retirement income. We know that closing the gender retirement gap is a huge challenge, given the close link between retirement and employment and income patterns. However, given that poverty among the elderly is more common among women, we cannot afford to be indifferent to it. There are a number of measures that the pension industry can take. To begin with, in order for individuals to be included in pension systems, restrictions on the eligibility requirement for employment must be removed. Regardless of how much you earn, how hard you work, or how long you have been working, every individual should have the opportunity to participate in a pension plan that provides adequate benefits.” 

Turkey has development areas

Compared to the previous year, Turkey increased its score by 3 points with the improvement in the minimum pension and some other criteria and ranked 39th in the general ranking with 45.8 percent, 35th in the "Qualification Sub-Index" and 38th in the "Sustainability Sub-Index" with 28.6 percent, and ranked 30th in the 'Integrity Sub-Index' with 66.7 percent. According to the results of the research, while there are areas of development of Turkey especially in terms of sustainability, high net substitution rate, low household and public debt ratio, demographic structure, State Contribution incentive, transparent, reliable and effective management of the Private Pension System were identified as strong areas. The report contained recommendations on improving the minimum and needy pension level for Turkey, preventing early access to private pension savings and making it mandatory to receive a certain part of the private pension savings as a monthly salary during the retirement period. 

It's time to accelerate, not curb, pension reform

Serap Özalp Arslanargin, Mercer Turkey Private Pension Consulting and Broking Leader, pointed out that the pandemic has exacerbated socio-economic inequality in many parts of the world and said: “From a long-term investment perspective, we are talking about an extremely difficult environment in which historically low interest rates and, in some cases, negative yields clearly affect profitability. Complicating the issue even more, the difference in pension income between the genders, the fact that women spend their retirement periods decently, which has even fewer rights, also brings additional difficulties. For the first time this year, the report examined the impact of the gender gap on retirement income. According to the research, there is a gender difference in every retirement income system in the world. In general, the main reasons for the gender-related retirement income gap are defined as employment, retirement income design and socio-cultural situations. The report draws attention to what needs to be done to improve women's retirement incomes around the world and advises employers, system regulators and governments. With these concerns, delivering a secure retirement promise depends on policymakers and industry stakeholders taking collective action to examine the strengths and weaknesses of pension systems to deliver better retirement benefits for every individual.”