In the Melbourne Mercer Global Pension Index 2017, India stood at the 28th position among 30 countries that were part of the index. The country’s overall score was 44.9 (the highest was of Norway, 74.7, and the lowest was of Argentina, 38.8), and it fell in the ‘D’ rated category (score of 35-50). No country was able to get a grade of A (index value being more than 80).

The index, which sees its ninth edition this year, has three sub-categories—adequacy, sustainability and integrity. In the sustainability category, India’s pension system was found to be more sustainable than that of several countries such as Germany, France, Japan, Brazil, China and Argentina. The improvement in the sustainability sub-index (from 40.9 to 43.8) was primarily due to the country's new economic growth.

Sustainability: For this edition, a new question was added regarding real economic growth. A long-term real economic growth can have several benefits, including higher average incomes, lower unemployment, reduced government borrowing, higher levels of saving and often improved investment returns. Most of these outcomes would lead to a stronger retirement income system and a more sustainable pension system. This change led to material changes in the sustainability sub-index values, and countries that have seen a significant improvement in their value are those that have had high real economic growth during the past 3 years and where this is projected to continue during the next 3 years. These include China, India, Indonesia, Ireland and Malaysia. Conversely, countries with significant pension assets and high mandatory contributions but with much lower real economic growth have seen a decline in their sustainability sub-index value. These include Canada, Denmark and the Netherlands.

Integrity: India’s score in the integrity sub-index also improved—from 53.4 to 55.1. According to the report, the extension of pension benefits to the unorganized sector and schemes like Pradhan Mantri Vaya Vandana Yojana (PMVVY) are some measures in the right direction. The integrity sub-index considers three broad areas of the pension system—regulation and governance; protection and communication for members; and costs. For this sub-index, a range of questions were asked about the requirements that apply to the funded pension plans in each country, normally in the private sector. In terms of cost, India scored a high of 9.8 as the percentage of total pension assets held by the largest 10 pension funds or providers here is large, as is the percentage of total pension assets held in various types of pension funds.

Adequacy: The adequacy sub-index considers the benefits provided to both the poor and the median-income earner as well as several system design features and characteristics which enhance the efficacy of the overall retirement income system. The net household saving rate and home ownership rate are also included as non-pension savings represent an important source of financial security during retirement. In this regard, while India's score remains unchanged from 2016 at 39.5, a point to note is that there appears a stark mismatch in how the assets are held. For India, along with China and Singapore, the level was more than 85%. In contrast, India scored low in another question: what is the proportion of total pension assets invested in growth assets? For India, the level of growth assets was less than 10%. Moreover, while many countries offer a minimum pension, India does not.

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