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Shanghai HR

Conference G L O B A L P E N S I O N S TAT U S

A N D I T S E N L I G H T E N M E N T T O

C H I N A

M E R C E R G L O B A L H R C O N F E R E N C E S

EDWARD FANG

CONSULTING DIRECTOR

SEPTEMBER 19

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50+ C O U N T R I E S

8,700+ S T A F F

60+ C I T I E S

70+ Y E A R S E X P E R I E N C E

*Assets under advisement includes aggregated data for Mercer Investment Consulting LLC and its affiliated companies globally (“Mercer”). Data is derived from a variety of sources, including, but not limited to, third-

party custodians or investment managers, regulatory filings, and client self-reported data. Mercer has not independently verified the data. Where available, data is provided as of 31 December 2018 (“Reporting Date”).

If data was not available as of the Reporting Date, information from a date closest in time to the Reporting Date, which may be of a more recent date than the Reporting Date, was included. Data includes assets of

clients that have engaged Mercer to provide project-based services within the 12-month period ending on the Reporting Date, and assets of clients that subscribe to Mercer’s Manager Research database.

**AUM figure as or 30 June 2019.

M E R C E R I N V E S T M E N T B U S I N E S S

MERCER 4

TOOLS AND RESEARCH

• Global Investment Manager

Database

• Performance Analytics

• Investment Research

• Operational Due Diligence

• MercerInsight Platform

• Global Research “Boutique”

$ 7trn *

Subscriber Assets

Covering 7,000+ Investment

Managers

A D V I C E

• Investment Strategy

• Asset Allocation

• Portfolio Construction

• Manager Selection

• Responsible Investment

• Transitions, Custody, FX

$ 12.3trn *

Under Advice

10,600+ Consulting Clients

SOLUTIONS

• Investment Management

• Single Asset Class

• Alternative Assets

• Diversified Portfolios

• Liability Solutions

• Multi Managers for Single

Industry

• Transition Solution

$ 241bn **

Under Implementation

1,100+ Discretionary Clients

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P E N S I O N G A P

• The pension gap in 2015 is about $70

trillion

• According to our forecast, the gap will

grow by 5% annually, reaching $400

trillion in 2050, which is equivalent to an

additional $28 billion in deficit per day

• The pension gap mainly depends on –

Target replacement rate (70%)

Retirement age (60-70 years old) and

Average life expectancy

4.3

2.5

3.5

4.5

2.4

4.4

1.8

2.8

2 2

3

5

养老金缺口的规模（万亿美元，

2015年）

Column3 Column2 Column1

2012 2013 2014 2015

Source: Mercer

来源：美世数据

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T H E M U L T I - P I L L A R A P P R O A C H

PILLAR 0

• A basic public pension that provides a minimal level of protection

PILLAR 1

• A public, mandatory and contributory system linked to earnings

PILLAR 2

• A private, mandatory and fully funded system

PILLAR 3

• A voluntary and fully funded system

PILLAR 4

• Financial and nonfinancial support outside formal pension arrangements

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M E L B O U R N E M E R C E R G L O B A L P E N S I O N I N D E X

• Pension coverage

• Total assets

• Contributions

• Demography

• Government debt

• Economic growth 35%

SUSTAINA

BILITY

• Benefits

• System design

• Savings

• Tax support

• Home ownership

• Growth assets

40% ADEQUACY

• Regulation

• Governance

• Protection

• Communication

• Costs 25% INTEGRITY

10 YEARS 34 COUNTRIES 40+ INDICATORS

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I D E A L S Y S T E M

A D E Q U A C Y

• Provide minimum pension to the poor

who occupy a reasonable proportion

of society average income.

• Maintain net (after-tax) replacement

rate of at least 65% when a full-time

employee with average income

retires.

• At least 60% of cumulative retirement

benefits can be used as a source of

income.

S U S TA I N A B I L I T Y

• At least 70% working-age population

should participate in private pension

schemes.

• Current pension assets should

exceed 100% of GDP in order to

prepare for future burden.

• Employment rate of those aged 55-

64 should reach at least 70%.

I N T E G R I T Y

• Strict and prudent regulation of

private pension schemes.

• Regular membership communication,

including personal statements,

expected retirement income and

annual reports.

• Define the funding requirements for

Defined Benefits and Defined

Contributions schemes.

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G L O B A L G R A D E S

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N AT U R A L T E N S I O N B E T W E E N

A D E Q U A C Y A N D S U S T A I N A B I L I T Y

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P R O F E S S I O N A L I N V E S T M E N T C A P A B I L I T I E S H E L P

O B T A I N M O R E E F F E C T I V E R E T U R N S

Scope of quartiles

(i.e. 25% to 75%)

Median 90% Range

Simulated multiples of real wages at retirement age of 65

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C H I N A

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C H I N E S E V I E W S O N P E N S I O N

New Employee Working hard for a better life Housing

1/3

NEVER counting savings for retirement

85%

Willing to CHANGE CURRENT

LIFESTYLE for better retirement life

Family

formation

Health is essential to Wealth

Families formed

Retraining Reaching retirement Phased retirement

86%

Regard SKILL DEVELOPMENTS are

the most important opportunities and

benefits in work

KEEP HEALTHY

Ranks FIRST in good lifestyles after

retirement

2/3 Hope to live over 80 years old

1/3 Have confidence on it

68% Hope to

continue

working after

retirement

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S U R V E Y A B O U T ‘ W H O B E R E S P O N S I B L E F O R

E N S U R I N G E N O U G H I N C O M E A F T E R R E T I R E M E N T ?

1%

5%

14%

15%

23%

32%

52%

74%

0% 20% 40% 60% 80%

None of these

Personal financial advisor orsecurity broker

Former or Incumbent Employer(s)

Personal Insurance

Family

Personal Pension/InvestmentFund/Bank

Government

Individual

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S O L V I N G C H A L L E N G E S T O C H I N A R E T I R E M E N T S C H E M E

Raising minimum support to

the poorest elderly

Increasing coverage of

occupation pension system

Improve communications

to members

Force part of supplementary

pension to be used as

income source after retirement

Gradually raise the age of

receiving national pension

More investment options to

greater growth asset exposures

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E N L I G H T E N M E N T S T O C H I N A P E N S I O N S Y S T E M

• Construction of Second

Pillar Pension System

• Individual retirement

accounts

SYSTEM DESIGN

• Establishment of tax

incentives for participation

in pension schemes

• Delayed retirement age

PARTICIPATION RATE

• Default Portfolio (Pension

Target Date Fund)

• Investing in growth assets

SAVINGS LEVEL

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P E N S I O N I N V E S T M E N T I N C H I N A

1. Managing volatility risk of

economic cycle from a LONG-

TERM PERSPECTIVE

2. Implementing value preservation

and appreciation through

DIVERSIFIED INVESTMENT

3. Gradually opening up

OVERSEAS INVESTMENT for a

long-term positive impact

4. Improving GOVERNANCE

STRUCTURE to strengthen

confidence

5. GREEN FINANCE

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F o r f u r t h e r c o m m u n i c a t i o n s p l e a s e c o n t a c t : L e o S h e n C h i n a W e a l t h L e a d e r T e l : + 8 6 2 1 6 1 4 1 6 6 9 7 E m a i l : l e o . s h e n @ m e r c e r . c o m E d w a r d F a n g C o n s u l t i n g D i r e c t o r T e l : + 8 6 2 1 6 1 0 3 5 4 1 7 E m a i l : x i a n g . f a n g @ m e r c e r . c o m A d d r e s s : R o o m 4 3 0 1 , H o n g K o n g N e w W o r l d T o w e r , 3 0 0 H u a i h a i Z h o n g R d . , S h a n g h a i , 2 0 0 0 2 1

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