• UAE improves its score and ranks 25th in the global Index

Dubai, UAE – The United Arab Emirates’ (UAE) retirement income system improved its score, ranking 25th globally among countries with robust pension systems such as the United States, Singapore and France in the 14th annual Mercer CFA Institute Global Pension Index (MCGPI). This is the second year UAE has been included in the report.

Globally, Iceland was top, followed by the Netherlands, while Thailand ranked last. This year’s MCGPI also features Portugal as a new addition.

The MCGPI is a comprehensive study of 44 global pension systems, accounting for 65 percent of the world’s population. It benchmarks retirement income systems around the world, highlighting some shortcomings in each system, and suggests possible areas of reform that would help provide more adequate and sustainable retirement benefits. The UAE retirement income system was benchmarked against global peers across three key areas of focus: adequacy, sustainability, and integrity.

UAE’s overall index value improved from 59.6 in 2021 to 61.8 in 2022, jumping from C to C+. This is primarily due to improvement in its scores for adequacy and sustainability. The UAE’s pension adequacy rankings are supported by the country’s generous retirement benefits, which ensure a continued income to sustain a good quality of life with a suitable minimum pension relative to earnings. Its improvement in sustainability can be attributed to the UAE’s high labor force participation rate, especially for individuals over the age of 55. The robust governance structure around the national pension system in the UAE also contributed to its strong ranking in terms of integrity.

Overall, the UAE has put in place a sound structure for a funded pension system for Emiratis with both the public and private sectors setting aside mandatory contributions during an employee’s tenure. Progress is being made to implement a new retirement savings scheme targeted at supporting private sector employers and expat employees to plan for their financial future.

The UAE’s retirement income system comprises a minimum state pension and a national employment-based scheme administered by the Abu Dhabi Pension fund (ADPF), the Sharjah Social Security Fund (SSSF), and the General Pensions and Social Security Authority (GPSSA) for the rest of the Emirates. Emiratis contribute 5 per cent of their salary, and employers contribute 12.5 –15 per cent of an employee’s salary, with benefits guaranteed by the government.

As the country continues to ramp up its effort to attract and retain talent, the UAE also recently announced the launch of a new mandatory unemployment insurance scheme, which is applicable for both public and private sector employees, with the mandate to help both Emirati and foreign employees receive compensation of up to 60 per cent of their previous salary for three months if they lose their jobs. Furthermore, the recently launched ‘Golden Pension’ scheme is aimed at helping private-sector foreign employees invest their end-of-service benefits as well as support employers to fund their end-of-service financial commitments

Commenting on the results of the Index, Robert Ansari, Mercer's Head of Investment and Retirement for IMETA, stated: “The UAE’s index score  improved this year. , elevating the country’s rank from C to C+ Included in the index for the second year, the UAE has fared better than a number of more established global peers. Like many of its peers, the UAE is preparing for an increased population size entering retirement, necessitating a well-run and adequately provisioned pension scheme.

He continued: “A number of local and international firms with UAE operations recognize the benefits of private pensions and employee workplace saving schemes as a means to attract and retain talent, with the recent launch of the unemployment pension scheme — the so-called “Golden” pension scheme — aimed at enabling locals and expats to invest in their future while supporting the private sector with employee retention, ultimately furthering the government’s ambition to be a magnet for top talent.”

MCGPI has, however, identified key areas that may be improved to continue to retain and build on UAE’s ranking. Factors include introducing a minimum access age to ensure benefits from pension plans are preserved for retirement purposes. As life expectancy is on the rise, leading to more people in retirement, increasing the state pension age may also help relieving some of the burden on the state pension. Furthermore, increasing investment towards educating and promoting a savings culture in the UAE amongst locals, will help address the lack of planning for a life of retirement,

Ziad Zein, CFA, President of CFA Society Emirates commented: “The release of the Mercer CFA Institute Global Pensions Index comes at a critical time for the world economy. The rapidly changing economic environment has challenged all the norms and tools we use for planning a sound and secure financial future. The broad coverage, along with the comparative features of the Index, will make it an essential and reliable guide for all the stakeholders.”

By the numbers

UAE had an overall index score of 61.8, ranking 25th on the list. Index uses a weighted average of the sub-indices of adequacy, sustainability and integrity.

The country scored 63.8 (27th globally) in adequacy, driven by the country’s generous retirement benefits with suitable minimum pensions relative to earnings. Positive scores around sustainability are driven by the high labor force participation rate, especially for individuals over the age of 55 and due to the sound structure of a funded pension system with mandatory contributions set aside for the retirement benefit, with a score of 51.9 (25th globally). The country’s highest score was awarded for the integrity of its pension systems, 72.6 (26th globally), supported by the overall high degree of governance structure.

Results

Globally, Iceland had the highest overall index value (84.7), closely followed by the Netherlands (84.6) and Denmark (82.0). Thailand had the lowest index value (41.7). For each sub-index, the systems with the highest values were Iceland for adequacy (85.8) and sustainability (83.8), and Finland for integrity (93.3). The systems with the lowest values across the sub-indices were India for adequacy (37.6), Austria for sustainability (22.7), and the Philippines for integrity (30.0).

In comparison to 2021, Mexico showed the most improvement as a result of pension reform, which improved outcomes for individuals and enhanced pension regulation.

Mercer CFA Institute Global Pension Index

System

Overall Grade

Overall Score

Adequacy

Sustainability

Integrity

Iceland

A

84.7

85.8

83.8

84.4

Netherlands

A

84.6

84.9

81.9

87.8

Denmark

A

82.0

81.4

82.5

82.1

Israel

B+

79.8

75.7

81.9

83.2

Finland

B+

77.2

77.5

65.3

93.3

Australia

B+

76.8

70.2

77.2

86.8

Norway

B+

75.3

79.0

60.4

90.3

Sweden

B

74.6

70.6

75.7

79.5

Singapore

B

74.1

77.3

65.4

81.0

UK

B

73.7

76.5

63.9

83.0

Switzerland

B

72.3

68.7

70.5

80.7

Uruguay

B

71.5

84.5

50.6

79.8

Canada

B

70.6

70.8

64.7

78.6

Ireland

B

70.0

75.9

53.5

83.7

New Zealand

B

68.8

64.0

64.7

82.1

Chile

B

68.3

60.0

70.3

78.9

Germany

B

67.9

80.5

44.3

80.9

Belgium

B

67.9

80.8

39.1

87.5

Hong Kong SAR

C+

64.7

61.5

52.1

87.6

USA

C+

63.9

67.5

61.2

61.7

Colombia

C+

63.2

65.2

55.3

71.3

France

C+

63.2

84.6

40.9

60.1

Malaysia

C+

63.1

57.2

60.2

76.9

Portugal

C+

62.8

84.9

29.7

73.9

UAE

C+

61.8

63.8

51.9

72.6

Spain

C+

61.8

80.0

28.7

78.9

Saudi Arabia

C

59.2

61.4

54.3

62.5

Poland

C

57.5

59.5

45.4

71.2

Mexico

C

56.1

63.1

57.1

43.6

Peru

C

55.8

54.7

51.5

63.7

Brazil

C

55.8

71.1

27.8

70.5

Italy

C

55.7

72.3

23.1

74.7

Austria

C

55.0

69.8

22.7

76.5

South Africa

C

54.7

44.2

49.7

78.4

Japan

C

54.5

58.0

44.5

63.0

China

C

54.5

64.4

39.3

60.0

Taiwan

C

52.9

42.0

53.2

69.8

Korea

C

51.1

40.1

54.9

63.5

Indonesia

D

49.2

39.3

44.5

71.5

Turkey

D

45.3

45.6

29.8

66.6

India

D

44.4

37.6

40.7

60.4

Argentina

D

43.3

55.6

29.4

42.9

Philippines

D

42.0

40.5

52.3

30.0

Thailand

D

41.7

41.3

36.4

50.0

-Ends-

About the Mercer CFA Institute Global Pension Index (MCGPI)

The MCGPI benchmarks retirement income systems around the world, highlighting some shortcomings in each system, and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.

This year, the Global Pension Index compares 44 retirement income systems across the globe and covers 65 percent of the world’s population. The 2022 Global Pension index includes one new retirement income system – Portugal.

The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against more than 50 indicators.

The Global Pension Index is a collaborative research project sponsored by CFA Institute, the global association of investment professionals, in collaboration with the Monash Centre for Financial Studies (MCFS), part of Monash Business School at Monash University, and Mercer, a global leader in redefining the world of work and reshaping retirement and investment outcomes.

For more information about the Mercer CFA Institute Global Pension Index, click here.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 83,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.

About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 190,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide, and there are 160 local societies. For more information, visit www.cfainstitute.org or follow us on LinkedIn and Twitter at @CFAInstitute.

      1. the Monash Centre for Financial Studies (MCFS)

A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption.

Contact:   
Ana Baptista
ana.baptista@mercer.com