Nigeria has been ranked 64th position in the recent global pension system report by the Allianz Group, one of the world’s leading insurers and asset managers.
Allianz, in the maiden edition of its, “Global Pension Report,” unveiled recently in which it analysed 70 countries with its proprietary pension indicator – the Allianz Pension Indicator (API) – took the pulse of pension systems around the world.
“Nigeria ranks on the 64th place, especially because of the insufficient adequacy of its pension system. The coverage of the pension system is still very low and limited access to financial services hampers the build-up of sufficient private old-age savings to cushion the lack of the public pension pillar.
“With respect to sustainability, Nigeria ranks also in the bottom third. The harmonisation of the retirement ages of the various professions and adjusting the retirement age in line with future gains in life expectancy would improve the long-term sustainability of the pension system further.
“Among the analysed countries, Nigeria has by far the most comfortable starting position especially due to the fact that it has one of the youngest populations worldwide.
“But nevertheless, the number of people aged 65 and older is set to increase from 5.6 million today, to around 16 million in 2050. Thus, there is a need for the introduction of a pension system with a broad coverage and for further improvement of the access to financial services,” it added.
The analysis which was based on two decisive dimensions of sustainability and adequacy, covered pension systems across the world and demographic and fiscal prerequisites.
In the final result of its analysis, Allianz noted that over the next decades, the number of people in retirement age would increase markedly and this would put social security systems under severe stress.
It further noted that only a handful of countries have already made their pension system demography-proof, citing Sweden, Belgium and Denmark, as example.
It added that in most other countries, pension systems continue to struggle with high public deficits and an uneven balance between sustainability and adequacy.
In Africa, the report noted that no African country ranks among the top-10 – as pension systems in most of these countries are still in the build-up phase.
On how the API conducted its analysis, Allianz in the report said the indicator followed a simple logic, adding that it started the analysis with the demographic and fiscal prerequisites and then continued to examine pension systems along their two decisive dimensions: sustainability and adequacy.
“Hence, it is based on three pillars and takes all in all 30 parameters into account, which are rated on a scale of one to seven, with 1 being the best grade. By adding up all weighted subtotals, the API assigns each of the analysed 70 countries a grade between one and seven, thus providing a comprehensive view of the respective pension system”, the Allianz report said.
“Demographics and pensions have been eclipsed by other policies in recent years, first and foremost climate change and today the fight against Covid-19,” Chief Economist at Allianz, Ludovic Subran said.
“But you ignore demographics at your own peril, demographic change will soon be back with a vengeance. Defusing the looming pension crisis and preserving generational justness and equality are key for building inclusive and resilient societies.”
According to the API analysis, the dramatic shift in demographics is best characterised by the increase in the global old-age dependency ratio: Until 2050, it will grow by a whopping 77percent to 25 percent i.e., faster than in the last 70 years since 1950. In many emerging economies the ratio is going to more than double within the next three decades, that is, in less than half of the time this development took in Europe and Northern America. The most prominent example is China where the ratio is going to increase from 17 percent to 44 percent For industrialised countries, however, the absolute level of this ratio is the main reason for concern, reaching, for example, 51 percent in Western Europe.