The Evaluation of ASEAN-Members Pension Scheme Performance


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.

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Fig. 1
Fig. 2


  1. 1.

    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).

  2. 2.

    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.

  3. 3.

    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).

  4. 4.

    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).

  5. 5.

    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).

  6. 6.

    Risk differentials of portfolio performance falls on scheme members.

  7. 7.

    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.

  8. 8.

    Alternative asset pricing models introduced multi-factor approaches. See Feeney and Hester (1964); Ross (1976); Chen et al. (1986); Ingersoll (1987); and Fama and French (1992).

  9. 9.

    Fully funded model alternatively invests contributions in financial assets therefore the contribution rate is relatively lower resulting an increase to savings (Cigno and Rosati 1992, 1996, 1997; Cigno and Werding 2003; Fuster et al. 2003).


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Table 1 Performance measures
Table 2 PSP-Index

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Estrada, M.A.R., Koutronas, E. The Evaluation of ASEAN-Members Pension Scheme Performance. Glob Soc Welf 8, 59–70 (2021).

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  • Social protection
  • Welfare
  • Social security
  • Economic modeling
  • Policy modeling

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