Gross pension wealth, indicating the magnitude of the total pension promise, ranges, for men, from a high of 20.4 years of earnings in China for low earners to a low of 4 in Thailand for high earners. The value for women in China is actually even higher at 21.0, meaning that someone on 50% average earnings throughout the lifetime has a mandatory pension worth 21.0 times their earnings level at retirement, though the values in Viet Nam are even higher for women at 22.8 across all earnings levels.
Pensions at a Glance Asia/Pacific 2018
Pensions at a Glance Asia/Pacific
Gross pension wealth
Pension wealth shows the size of the lump sum that would be needed to buy a flow of pension payments equivalent to that promised by the mandatory pension system in each economy. Pension wealth is measured and expressed as a multiple of gross annual individual earnings. It is shown here for workers with earnings of 50%, 100% and 200% of the average, separately for men and women. For a fuller picture though consideration needs to be given to both retirement ages and life expectancy variation across economies. For example, the general retirement age within OECD countries is 65 or 67, whereas for the non-OECD economies it is generally either 55 or 60 for men. Whilst it is shown later that the life expectancy levels in non-OECD economies are lower than for OECD countries the actual duration of retirement is longer in the non-OECD economies for those who reach retirement age.
The average pension wealth for the OECD is 9.7 for average earners, 12.0 for 50% average earners and 8.1 for 200% average earners. The other OECD economies are generally below these averages apart from France at the 100% and 200% earnings levels and Italy across all earnings levels. For the Asian/Pacific OECD economies they are all lower than the OECD average at all earnings levels, with the exception of Australia and New Zealand at the low earners level. For the non-OECD economies China, India, Malaysia and Viet Nam are higher at all earnings levels.
Viet Nam has the highest pension wealth of all for each of the earnings levels, with the exception of the 50% level for men where China is slightly higher. The lowest pension wealth figures are found in Indonesia for low earners, at 7.8. The value for China is nearly three times that of Thailand for men with lifetime earnings equivalent to 50% average within their economy.
The level of pension wealth either remains steady or declines as the level of earnings increases in all the other economies. In Thailand for 200% average earners the level of pension wealth is approximately half that for 50% average earners. Likewise in Japan, Singapore and the United States, the levels are around 60%, though in all cases the actual lump-sum value for 200% average earners is at least double. For example the lump sum in Thailand for 50% average earners is 8.4 * 0.5 = 4.2 times average earnings, compared to 4.1 * 2.0 = 8.2 times average earnings for those at the 200% earnings level. For New Zealand the pension wealth at 200% average earnings is half that for average earnings, which in turn is half that for 50% average earnings. This is expected as the mandatory pension in New Zealand is not dependent on earnings and so for all earnings levels the pension wealth is worth 8.9 times individual earnings for men and 9.5 individual earnings for women. The difference between sexes is due to the difference in life expectancies.
As mentioned earlier the levels of pension wealth for women are generally higher than those for men. No economy has higher levels for men than women, though the levels are identical for Malaysia, Singapore and Sri Lanka across all earnings levels. The variation for women is also greater than that for men, ranging from 22.8 in Viet Nam for 50% average earnings to 4.5 in the Thailand for high earners. The rate of decline in pension wealth as earnings increase is virtually identical between the sexes for all the economies included.
Table 2.3. Gross pension wealth by earnings, men and women
Source: OECD pension models.
Figure 2.3. Gross pension wealth by earnings, low and average earners
Source: OECD pension models.