Mercer’s Global Pension Index: How African pension systems fair globally

Mercer’s Global Pension Index, now in its 15th year, has released its latest report highlighting the challenges and opportunities facing pension systems around the world. In a recent interview with CNBC Africa, Rich Nuzum, Chief Investment Strategist at Mercer, discussed the key findings of the report, shedding light on the state of retirement systems in various countries, including South Africa and Botswana. The annual report evaluates 47 pension systems worldwide, using a grading scale of A, B, and C. Only four systems received an A rating, with South Africa and Botswana both receiving a C rating. The evaluation criteria include adequacy, sustainability, and integrity of the retirement systems. Nuzum pointed out that 12 other systems also received a C rating, including the U.S., China, Japan, Italy, and Taiwan. One of the main areas of improvement identified for South Africa and Botswana is the need to provide a minimum level of pension support to the most vulnerable segments of the population. The report also highlighted the importance of expanding pension coverage beyond formal employment and addressing issues of leakage from the system, where individuals withdraw funds before retirement. Nuzum emphasized the link between economic growth and retirement income security, noting that strong economic performance can provide resources to enhance pension systems. He mentioned that South Africa, as an emerging market, has the opportunity to attract investment from both China and the U.S., which could bolster its economy and address retirement savings challenges. The report also highlighted countries excelling in their retirement income systems, with the Netherlands, Iceland, and Denmark ranking in the top three. These nations have driven robust GDP growth and high employment rates, enabling them to prioritize retirement income security. They have established safety nets funded by government revenues and have implemented mandatory retirement provisions that cover a wide range of workers. Addressing the issue of low retirement savings globally, Nuzum mentioned that many countries, including the U.S., face challenges in ensuring sufficient retirement funds for their populations. He underscored the importance of incorporating artificial intelligence (AI) in pension management to improve efficiency and investment returns. While AI presents opportunities for economic growth and workforce participation, Nuzum acknowledged the risks associated with AI errors and emphasized the need for strong governance and accountability. In conclusion, the 15th annual Mercer’s Global Pension Index report underscores the urgent need for governments to reform and strengthen pension systems to ensure retirement income security for all citizens. By addressing key areas of improvement and leveraging technological advancements like AI, countries can enhance the sustainability and integrity of their pension systems, providing a more secure future for their populations.