Singapore's CPF among world's more mature pension systems: EY report

Pension systems need rapid reforms: EY
Report identifies areas of opportunities for pension, retirement providers to help deliver social policy around pensions
By Claire Huang, The Business Times, 6 Sep 2014

SINGAPORE'S Central Provident Fund (CPF) is among the more matured global pension systems in the world but it is still being refined, this was highlighted by an EY report released on Friday.

The report titled Building a better retirement world called for rapid reform in pension and retirement systems globally as the industry turns global at an exceptional speed, especially on the policy and delivery fronts.

Graeme McKenzie, EY's global pension leader, said the increasing importance of pension and retirement systems demands higher quality regulation, supervision, governance and transparency.

"Discipline, reasoning and hard decisions will be necessary to make the retirement world better, fairer and sustainable over the long term to address the financial impact of a global demographic transformation."

To this end, the report identified five areas that are critical - financial adequacy, financial sustainability, performance, efficiency and effectiveness, as well as political aspects.

Brian Thung, financial services partner at EY in Singapore, said pension systems presented significant business opportunities in many countries.

"In Singapore, pension products providers will increasingly be expected to back up their offerings with customer communication and education that explain clearly what the products do and how, if at all, they are different from what the CPF would offer."

Mature markets such as Australia, the United Kingdom and Switzerland have been growing large pension pools that can be serviced privately, said Mr Thung.

EY identified seven key areas that present opportunities for pension and retirement providers to help deliver social policy around pensions.

One of them is the need for local financial markets to evolve concurrently with growth in pension assets and another is the need to improve regulation and transparency.

The report said it is necessary to rebalance benefit expectations with financial resources and increase focus on operational excellence.

A recalibration of investment functions and investment management is also in order.

EY added that it is essential to become customer-centric and to find simplicity in complex systems, to promote informed decision-making and action.

Mr Thung noted that many of the key areas identified are not unique to Singapore.

"Increasingly, uncertain investment returns and inflationary pressure on costs of retirement living provide the impetus for stakeholders to find creative solutions to address these concerns, improve operational excellence and communicate more effectively with members," he said.

EY conducted more than 80 interviews with pension and retirement professionals in 18 countries across the Americas, Asia-Pacific and Europe to identify key challenges and opportunities in global pension and retirement markets. The review of the 18 pension and retirement markets was conducted between August and December 2013.