This study introduces a comprehensive evaluation tool to study the performance of pension schemes. The Pension Scheme Performance Index (PSP-Index) suggests the following factors: education infrastructure growth rate (∆V1), training program growth rate (∆V2), diet improvement growth rate (∆V3), health coverage growth rate (∆V4), life expectancy growth rate (∆V5), pension coverage growth rate (∆V6), labor market demand growth rate (∆V7), total tax collection growth rate (∆V8), and capital expansion growth rate (V9). PSP-index attempts at the standardization of performance measures that have typically applied in pension schemes irrespective of their type and level of development. The model investigates pension scheme performance of five ASEAN-member countries—Singapore, Malaysia, Indonesia, Thailand, and Philippines.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Contribution accumulation may be observed to be invested on low-risk low-yielding investments due to persistent (and unexpected) inflation. However, investment capital gains are intended to use to meet short-term financial obligations and not for the payment of future pension benefits (European Commission 2004).
It is possible, theoretically, for every generation to obtain higher benefits than contributions paid, given that, the pension rate of return exceeds the market rate of return indefinitely (Samuelson 1958). In the case of actuarial imbalance, the state bears the financial risk for benefits payments.
The use of alternative abundant natural resource substitutes, recycling, and, resource optimization can result of purposeful activity in response to signals of increased scarcity (Krautkraemer 2005).
In contrast to pay-as-you-go schemes, fully-funded schemes are dissociated from demographic risks. Oksanen (2001) claimed that this argument is somehow misleading because aging affects savings, which in turn, it should also affect interest rates. Brooks (2000) and Merrill Lynch (2000) produced simulations showing that long-lived retiree population can suffer significant losses to their pension wealth due to an interest rate shock. Certain occupation schemes though, can be subject of demographic risks (Brooks 2000; Stevens 2001).
Fully-funded schemes are subject to liquidity risk. For instance, a potential interest rate rise or stock price fall, may force fund management to liquidate part of its portfolio at unfavorable prices and incur losses. This is normally translated into lower investment returns for the retirees; the fund cannot fully meet its obligations. If pension management exercises the ability to borrow the amount needed in order to meet its liquidity target, portfolio liquidation can be avoided. However, the fund would still bear the cost of borrowing (McLeod et al. 1993). If pension fund chooses to diversify its asset holdings abroad, in principle, it can increase investment returns given the same level of risk (Pfau 2011; Solnik and McLeavey 2004), but asset diversification comes with certain economic and political risks (Leinert and Eche 2000).
Risk differentials of portfolio performance falls on scheme members.
In fact, Goodwin used did not the ‘effective replacement rate’ as an adequacy indicator but as a measure of the extent to which welfare systems promote stability over an individual’s life course.
Aaron, H. J. (1966). The social insurance paradox. Canadian Journal of Economics, 32(3), 371–374.
Advisory Council on Social Security (ACSS). (1997). Report of the 1994–1996 Advisory Council on Social Security. Volume I: Findings and Recommendations. Retrieved from Washington, D.C.:
Asian Development Bank. (2018). General Information and Database Statistics. Retrieved from: http://www.adb.org
Aspalter, C. (2006). The east welfare model. International Journal of Social Welfare, 15(4), 290–301.
Bajtelsmit, V., Rappaport, A., & Folster, L. (2013). Measures of retirement benefit adequacy: Which, why, for whom, and how much? Society of Actuaries. Schaumburg, IL. Retrieved from https://www.soa.org/Files/Research/Projects/research-2013-measures-retirement.pdf. Accessed 15 April 2018.
Ball, R. M., & Bethel, N. T. (1997). Bringing the centuries: The case for traditional social security. In E. R. Kingson & J. H. Schulz (Eds.), Social security in 21st century (pp. 259–294). New York: Oxford University Press.
Beebower, G. L., & Bergstrom, G. L. (1977). A performance analysis of pension and profit-sharing portfolios: 1966-1975. Financial Analyst Journal, 33(3), 31–42.
Berkowitz, S. A., Finney, L. D., & Logue, D. E. (1988). The Investment Performance of Corporate Pension Plans: Why They Do Not Beat the Market Regularly Santa Barbara, CA: Praeger.
Bialowolski, P., & Weziak-Bialowolska, D. (2014). The index of household financial condition, combining subjective and objective indicators: An appraisal of Italian households. Social Indicators Research, 118(1), 365–385.
Biggs, A. G., & Springstead, G. R. (2008). Alternative measures of replacement rates for social security benefits and retirement income. Social Security Bulletin, 68(2), 1–19.
Blahous, C. P. I. (2000). Reforming social security: For ourselves and our posterity. Westport, CT: Ptaeger Publishers.
Blondell, S., & Scarpetta, S. (1999). The retirement decision in OECD Counties. OECD Economics Department Working Papers No. 202. OECD. Paris.
Board, C. P. F. (2018). General Information and Database. Retrieved from: https://www.cpf.gov.sg/members. Accessed 1 May 2018.
Bohl, M. T., Lichewski, J., & Voronkova, S. (2011). Pension funds' performance in strongly regulated industries in Central Europe: Evidence from Poland and Hungary. Emerging Markets Finance & Trade, 47(3), 80–94.
Bohn, H. (2010). Should Public Retirement Plans Be Fully Funded? Retrieved from Cambridge:
Borella, M., & Fornero, E. (2009). Adequacy of pension systems in Europe: An analysis based on comprehensive replacement rates. ENERGI Research Report No. 68 European Network of Economic Policy Research Institutes Retrieved from https://ssrn.com/abstract=2033652
Brooks, R. (2000). What will happen to financial markets when the baby boomers retire? Retrieved from: https://www.imf.org/external/pubs/ft/wp/2000/wp0018.pdf. Accessed 25 May 2018.
Brown, S. J., & Goetzmann, W. N. (1997). Mutual fund styles. Journal of Financial Economics, 43(3), 373–399.
Carhart, M. M. (1997). On persistence in mutual fund performance. Journal of Finance, 52(1), 57–82.
Chen, N. F., Roll, R., & Ross, S. (1986). Economic forces and the stock market: Testing the APT and alternative asset pricing theories. Journal of Business, 59(3), 383–403.
Chybalski, F. (2012). Measuring the multidimensional adequacy of pension systems in European countries. Pension institute discussion paper PI-1204. City University. London. Retrieved from https://www.pensions-institute.org/workingpapers/wp1204.pdf
Chybalski, F., & Marcinkiewicz, E. (2016). The replacement rate: An imperfect Indicator of pension adequacy in cross-country analyses. Social Indicators Research, 126(1), 99–117.
Cigno, A., & Rosati, F. C. (1992). The effects of financial and social security on saving and fertility behavior in Italy. Journal of Population Economics, 5(4), 319–341.
Cigno, A., & Rosati, F. C. (1996). Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA. European Economic Review, 40(8), 1561–1589.
Cigno, A., & Rosati, F. C. (1997). Rise and fall of the Japanese saving rate: The role of social security and intra-family transfers. Japan and the World Economy, 9(1), 81–92.
Cigno, A., & Werding, M. (2003). Children and pensions: Causes and remedies of the crisis in public pension schemes. Cambridge, MA: MIT Press.
Clingman, M., Burkhalter, K., & Chaplain, C. (2016). Replacement rates for hypothetical retired workers. Retrieved from Baltimore, MD: https://www.ssa.gov/oact/NOTES/ran9/an2016-9.pdf
Cole, C.R., & Liebenberg, A.P. (2008). An Examination of Retirement Income Adequacy Measures and Factors Affecting Retirement Preparedness. SSRC-Working Paper. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1272067
Connor, G., & Korajczyk, R. A. (1986). Performance measurement with the arbitrage pricing theory: A framework for analysis. Journal of Financial Economics, 15(3), 373–394.
Davis, E. P., & Hu, Y.-W. (2008). Does funding of pensions stimulate economic growth? Journal of Pension Economics and Finance, 7(2), 221–249.
Diamond, P. A. (1977). A framework for social security analysis. Journal of Public Economics, 8(3), 275–298.
Dixon, J. (1996). National Provident Funds in Asia: Something old, something borrowed, something new. Policy Studies Review, 38(Autumn), 72–87.
Ehnsson, G. (2008). Old-age pension systems in the Nordic countries. Retrieved from https://norden.diva-portal.org/smash/get/diva2:968720/FULLTEXT01.pdf:
Elton, E., Gruber, J., & Blake, C. (1996). The persistence of risk-adjusted mutual fund performance. Journal of Business, 69(2), 133–157.
European Commission. (2004). Classification of funded pension schemes and impact on government finance Retrieved from http://ec.europa.eu/eurostat/documents/3859598/5884325/KS-BE-04-002-EN.PDF/ccfc8b5a-a45e-4444-b467-3d2e1cab8d7e:
European Commission. (2018). General Information. Retrieved from http://ec.europa.eu/social/main.jsp?catId=849&langId=en Accessed 26 May 2018.
Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance, 47(2), 427–465.
Farrar, D. E. (1962). The Investment Decision under Uncertainty Englewood cliffs, NJ: Prentice-Hall.
Feeney, J. G., & Hester, D. D. (1964). Stock market indices: A principal components analysis. Cowles Foundation Discussion Papers, 175, 51.
Feldstein, M., & Liebman, J. B. (2002). Introduction. In M. Fieldstein & J. B. Liebman (Eds.), The distributional aspects of social security and social security reform (pp. 1–10). Chicago: The University of Chicago Press.
Ferson, W. E., & Schadt, R. W. (1996). Measuring fund strategy and performance in changing economic conditions. Journal of Finance, 51(2), 425–461.
Fuster, L., Imrohoroglu, A., & Imrohoroglu, S. (2003). A welfare analysis of social security in a dynastic framework. International Eonomic Review, 44(4), 1247–1273.
Goodin, R. E., Headey, B., Muffels, R., & Dirven, H.-J. (1999). The real worlds of welfare capitalism. Cambridge: Cambridge University Press.
Goodman, R., & White, G. (1998). Welfre orientalism and the search for an east Asian welfare model. In R. Goodman, G. White, & G. H. Kwon (Eds.), The east Asian welfare model: Welfare orientalism and the state. London: Routledge.
Goodwin, T. (1998). The information ratio. Financial Analyst Journal, 54(4), 34–43.
Gough, I. (2000). Welfare regimes in East Asia and Europe. Paper presented at the Development Economics Europe 2000, Paris.
Grech, G. A. (2013). How best to measure pension adequacy. Retrieved from http://eprints.lse.ac.uk/51270/1/__Libfile_repository_Content_Grech,%20AG_Grech_How_best_measure_2013.pdf:
Grinblatt, M., & Titman, S. (1989). Portfolio performance evaluation: Old issues and new insights. Review of Financial Studies, 2(3), 393–421.
Grinblatt, M., & Titman, S. (1993). Performance Measuremnt without benchmarks: An examination of mutual fund returns. Journal of Business, 6(1), 47–68.
Henricksson, R. (1984). Market timing and mutual fund performance: An empirical investigation. Journal of Business, 57(1), 73–96.
Henriksson, R., & Merton, R. (1981). On market timing and investment performance II. Statistical procedures for evaluation forecasting skills. Journal of Business, 54(4), 513–533.
Holliday, I. (2000). Welfare capitalism: Social policy in East Asia. Political Studies, 48(4), 706–723.
Holzmann, R. (1997). Pension reform, financial market development, and economic growth: Preliminary evidence from Chile. IMF Staff Papers 44, No.2. International Monetary Fund. Washington, D.C.
Holzmann, R. (1999). On economic benefits and fiscal requirements of moving from unfunded to funded pensions. In M. Buti, D. Franco, & L. R. Pench (Eds.), The Welfare State in Europe: Challenges and Reforms (pp. 139–196). Cheltenham: Edward Elgar.
Holzmann, R., & Guven, U. (2009). Adequacy of retirement income after pension reforms in central, eastern and southern Europe: Eight country studies. Washington, D.C.: The World Bank.
Holzmann, R., & Hinz, R. (2005). Old-age income support in the 21st century: An interntional perspective on pension systems reform. Retrieved from http://www.apapr.ro/images/BIBLIOTECA/reformageneralitati/bm%20income%20support%202005.pdf:. Accessed 28 May 2018
Huang, X., & Mahieu, R. J. (2012). Performance persistence of Dutch pension funds. De Economist, 160(1), 17–34.
Hurd, M. D., & Rohweder, S. (2008). The adequacy of economic resources in retirement. Working Paper WP 2008-184. University of Michigan Retirement Research Center. Ann Arbor, MI. Retrieved from http://mrrc.isr.umich.edu/publications/briefs/pdf/rb184.pdf. Accessed 25 June 2018
Indonesia Providen Fund (BJPS Ketenagakarjaan). (2018). General Information. Retrieved from: https://www.bpjsketenagakerjaan.go.id/
Ingersoll, J. E. (1987). Theory of financial decision making. Oxford: Rowman & Littlefield.
Irwin, F., Blume, M., & Crockett, J. (1970). Mutual funds and other institutional investors. New York: McGraw-Hill.
Irwin, F., & Vickers, D. (1965). Portfolio selection and investment performance. Journal of Finance, 20(3), 391–415.
Jensen, M. (1968). The performance of mutual funds in the period 1945-64. Journal of Finance, 23(2), 389–416.
JSTOR. (2018). Databse. Retrieved from: http://www.jstor.org/. Accessed 17 July 2018.
Koutronas, E. (2015). Untying Public Pension’s Gordian Knot: Profit Share Benefit Arrangements. (doctorate), University of Malaya, Kuala Lumpur, Malaysia.
Krautkraemer, A. J. (2005). Economics of natural resource scarcity: The state of debate. D.C.: Retrieved from Washington.
Kumar, G. R., & Perumal, R. (2016). Performance of selected bank mutual fund schemes impact in investor's decision making. International Journal of Advanced Research in Management and Social Sciences, 5(3), 361–370.
Lehman, B. N., & Modest, D. M. (1987). Mutual fund performance evaluation: A comparison of benchmarks and benchmark comparisons. Journal of Finance, 42(2), 233–265.
Leinert, J., & Eche, A. (2000). Advance Funding of Pensions. Retrieved from Gutersloh:
Lieksnis, R. (2010). Evaluating the financial performance of LAtvian and Estonian second pillar pension funds. Research in Economics and Business: Central and Eastern Europe, 2(2), 54–70.
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47(1), 13–37.
Lo, A. (2002). The statistics of Sharpe ratios. Financial Analyst Journal, 58(4), 36–52.
Mains, N. E. (1977). Risk, the pricing of capital assets, and the evaluation of investment portfolios:Comments. Journal of Business, 50(3), 371–384.
Malaysia Provident Fund (EPF). (2018). General Information. Retrieved from: http://www.kwsp.gov.my/portal/en/home. Accessed 18 July 2018
Mandatory Provident Fund Schemes Authority. (2010). Approaches to Measurement of Different Retirement Costs. Retrieved from http://www.mpfa.org.hk/tch/information_centre/publications/research_reports/files/Approaches_to_Measurement_of_Retirement_Costs.pdf
McLeod, W. R., Moody, S., & Phillips, A. (1993). The risks of pension plans. Financial Services Review, 2(2), 131–156.
Merrill Lynch. (2000). Demographics and the funded pension systems.
Miles, D., & Timmermann, A. (1999). Risk sharing and transition costs in the reform pension system in Europe. Economic Policy, 14(29), 251–286.
Mitchell, O. S., & Phillips, J. W. R. (2006). Social Security replacement rates for alternative earnings benchmarks. MRRC working paper WP 2006-116. University of Michigan. Michigan.
Mitchell, O. S., & Turner, J. A. (2009). Labor market uncertainty and pension system. Pension Research Council WP 2009-11. University of Pennsylvania. Philadelphia, PA. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1477119
Modigliani, F., & Modigliani, L. (1997). Risk-adjusted performance. Journal of Portfolio Management, 23(2), 45–54.
Mossin, J. (1966). Equilibrium in a Capital Asset Market. Econometrica, 34(4),768–783
Mutchler, J. E., Shih, Y.-C., Lyu, J., Bruce, E. A., & Gottlieb, A. (2014). The elder economic security standard index™: A new Indicator for evaluating economic security in later life. Social Indicators Research, 120(1), 97–116.
Novy-Marx, R., & Rauh, D. J. (2009). The liabilities and risks of state-sponsored pension plans. Journal of Economic Perspectives, 23(4), 191–210.
Oksanen, H. (2001). A Case for Partial Funding of Pensions with an Application to the EU Candidates Countries European Commission, economic paper no 149.
Pang, G., & Warshawsky, M. J. (2013). Retirement savings adequacy of U.S. workers. Benefits Quarterly, 30(1), 29–38.
Park, D. (2010). East and Southheast Asia's pension systems: Overview and reform directions. In S. W. Handayani (Ed.), Enhancing social protection in Asia and the Pacific: The proceedings of the regional workshop (pp. 136–156). Manila, Phillipines: Asian Development Bank.
Pfau, W. D. (2011). Emerging market pension funds and international diversification. Journal of Developing Areas, 45(1), 1–17.
Republic of Philippines Social Security System. (2018). General information. In Retrieved from https://www.sss.gov.ph/.
Ross, S. A. (1976). Arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), 341–360.
Ruiz Estrada, M. A. (2011). Policy modeling: Definition, classification, and evaluation. Journal of Policy Modeling, 33(4), 523–536.
Ruiz Estrada, M. A., & Park, D. (2018). The past, present, and future of Polciy modeling. Journal of Policy Modeling, 40(1), 1–15.
Ruiz Estrada, M. A., & Yap, S. F. (2013). The origins and evolution of policy modeling. Journal of Policy Modeling, 35(1), 170–182.
Samuelson, P. A. (1958). An exact consumption-loan model of interest with or without the social contrivance of money. Journal of Political Economy, 66(6), 467–482.
Schwarz, A. M. (2006). Pension system reforms. In A. Coudouel & S. Paternostro (Eds.), Analyzing the distributional impact of reforms: A practitioner's guide to pension, health, labor markets, public sector downsizing, taxation, decentralization, and macroeconomic modeling (Vol. II, pp. 1–42). Washingto, D.C.: World Bank.
Sharpe, W. F. (1964). Capital Asset Prices: A Theory Of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3),425–442.
Sharpe, W. F. (1966). Mutual fund performance. Journal of Business, 39(1), 119–138.
Sharpe, W. F. (1992). Asset allocation: Management and performance measurement. Journal of Portfolio Management, 18(winter), 7–19.
Sharpe, W. F. (1994). The Sharpe ratio. Journal of Portfolio Management, 21(1), 49–58.
Solnik, B., & McLeavey, D. (2004). International investments (5th ed.). Boston: Pearson Addison Wesley.
Stevens, Y. (2001). The role of occupational pensions in Europe: Elements and techniques of solidarity used within funded occupational pension schemes. Paper presented at the ninth annual colloquium of Supperannuation researchers, Sydney.
Thailand Social Security Office (SSO). (2018). General information. Retrieved from: http://www.sso.go.th. Accessed 21 July 2018.
The World Bank. (2018). General Information and Database Statistics. Retrieved from: https://data.worldbank.org/
Torben, M. A., Holmstrom, B., Honkapohja, S., Korkman, S., Soderstrom, H. T., & Vartiainen, J. (2007). The Nordic model: Embracing globalization and sharing risks. Helsinki: The Research Institute of the Finnish Economy (ETLA).
Treynor, J. L. (1965). How to rate Management of Investment Funds. Harvard Business Review, 43(1), 63–75.
Treynor, J. L., & Black, F. (1973). How to use security analysis to improve portfolio selection. Journal of Business, 46(1), 66–86.
Treynor, J. L., & Mazuy, K. K. (1966). Can mutual funds outguess the market? Harvard Business Review, 44(4), 131–136.
United Nations. (2018). General Information. Retrieved from: http://www.un.org/en/databases/index.html. Accessed 25 July 2018.
VanDerhei, J. (2006). Measuring retirement income adequacy: Calculating realistic income replacement rates. EBRI Issue Brief No. 297. Employee Benefit Research Institute. Washington D.C. Retrieved from https://www.ebri.org/pdf/briefspdf/EBRI_IB_09-20061.pdf. Accessed 26 July 2018
Voorheis, F. L. (1976). How do well do banks manage pooled pension portfolios? Financial Analyst Journal, 32(5), 35–40.
Walker, E., & Iglesias, A. (2010). Financial Performance of Pension Funds: An Exploratory Study. In R. Hinz, P. R. Heinz, P. Antolin, & J. Yermo (Eds.), Evaluating the Financial Performance of Pension Funds (pp. 39–95). Washington D.C: The World Bank.
Zhang, J., & Zhang, J. (2004). How does social security affect economic growth? Evidence from cross-country data. Journal of Population Economics, 17(3), 473–500.
Conflict of Interest
The authors declare that they have no conflict of interest.
This article does not contain any studies with human participants or animals performed by any of the authors.
Informed consent was obtained from all individual participants included in the study.
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Estrada, M.A.R., Koutronas, E. The Evaluation of ASEAN-Members Pension Scheme Performance. Glob Soc Welf 8, 59–70 (2021). https://doi.org/10.1007/s40609-018-00132-1
- Social protection
- Social security
- Economic modeling
- Policy modeling