SINGAPORE -- Japan's pension system was ranked the second-worst among 27 countries globally and at bottom place in Asia, due to the rapid pace the population is aging, according to U.S. consulting company Mercer. Singapore came out top in Asia.
The index measures global pension systems annually, covering public and private ones, by gauging their adequacy, sustainability and integrity. Japan scored 43.2 in total, a decline from the 44.1 recorded in 2015. Japan was just above Argentina in the ranking. In 2015 and 2014, India was the lowest in the world and South Korea, the second lowest, but both countries overtook Japan this year.
Japan scored poorly at 24.4 in the "sustainability" subindex. In this section, Japan was the world's third lowest, only higher than Austria and Italy, and Asia's worst. Mercer said that this was because of an expected increase in the aged population relative to the working population; extended retirements due to longer life span and; the large amount of government debt.
Japan's projected old age dependency ratio will fall to one retiree for every 1.44 working age people by 2040, the lowest among the 27 countries. Japan also showed weakness in the "adequacy" subindex, at 48.5, which covers benefits and growth in assets.
Mercer Japan retirement division Principal Kenji Sekine pointed out that the pace of growth in pension benefit in Japan is lower than that of prices. Japanese individuals need to prepare "well in advance with effective use of private pensions, such as corporate pensions and individual annuity products" instead of only relying on public pensions, Sekine warned.
But an aging population is a problem faced by many countries. "It is a political imperative that all countries, regardless of their size, and current standing on the [index], implement the necessary policy changes to withstand future challenges presented by the globally aging population," said David Knox, the author of the report and senior partner at Mercer.
India was the second lowest in Asia, or 25th globally, but its score increased by 3.1 points from last year, the largest margin of all. China fell one position to the 23rd place, due mainly to the reduction in support for the poor.
Singapore defended the region's top position for the 4th year, scoring 67.0. The city-state climbed three positions from last year's 10th, surpassing Canada, Chile and the U.K. Denmark topped the ranking, followed by the Netherlands, unchanged from 2015.