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Taking a multi-pillar approach on Asia’s pension reforms

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Taking a multi-pillar approach on Asia’s pension reforms

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As life expectancy continues to increase, with people born in developed countries since 1997 now having a 50-50 chance of living beyond 100 years,1 pension systems are faced with handling retirements that could last in excess of 40 years.

Meanwhile, cost of living in Asia continues to rise, evidence has suggested a notable shortfall for people to sustain their post-retirement lifestyle. Pension design in the future is likely to shift from asset accumulation to providing lifetime income in the form of decumulation solutions.2

A multi-pillar prescription for Asia

Given the diversity of challenges in the region, a system that includes a combination of solutions from a multi-pillar framework seems to be a good way to address the need for change. The World Bank has outlined a five-pillar pension framework, and proposed useful criteria to evaluate the performance of pension systems on the basis of five key outcomes: efficiency, sustainability, coverage, adequacy and security.3

Chart 1: The World Bank’s five-pillar pension framework

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