Saudi Arabia’s pensions rank alongside US And Hong Kong

A Saudi man carries a shopping bag at a market in the port city of Jizan in the southwest corner of Saudi Arabia. (AFP)

• Ageing population will create pressures on system
• Government introducing reforms in pension sector

LONDON: Saudi Arabia’s pension system has been given a similar rating to those granted to the US and Hong Kong, according to the results of a global pension index.
It is the first time the country has been included in the index compiled by the US consultancy firm Mercer.
The inclusion will likely be welcomed by those in the Kingdom pushing through reforms to Saudi Arabia’s pension provisions.
In March, the government launched the PPA (Public Pension Agency) Strategy 2022 which set out government plans to ramp up the Kingdom’s capabilities in risk management, investing and asset distribution. It also aimed to improve both training for its staff and the way services are provided to the country’s pensioners.
The Melbourne Mercer Global Pensions Index ranks 34 countries against a series of criteria, such as the sustainability of pension systems. It has been published every year for the last decade.
Saudi Arabia’s pension scheme ranked highly in the index due to high net household saving rates, significant investments in growth assets and the provision of regular monthly income to pensioners rather than lump-sums, the survey found.
However the country’s ageing population and the impact of lower oil prices on government finances is likely to increase pressure on pensions in the future, the survey said.
The index called for the Kingdom to improve the minimum level of support for the poorest people in Saudi Arabia as well as to increase the proportion of older people remaining in the workforce.
Encouraging people to keep working will counter the impact of the increasing life expectancy on government finances, the consultancy said.

“The changing dynamics of the region, lower oil prices, rapidly growing and ageing population will pose challenges to the country’s fiscal and macroeconomic stability, thereby impacting the pension systems,” said Mazen Abukhater, head of retirement, Mercer, Middle East.
“The government is taking practical measures towards reforming the pension schemes, enhancing investments and diversifying to raise the revenues within an effective and flexible framework of risk management and transparency. This will make future pension systems more sustainable over the longer term,” he said.
Countries that ranked highly this year included those in Scandinavia, with Denmark scoring an overall mark of 80.2 out of 100. At the other end of the scale, Argentina scored just 39.2 out of 100.