South Korea’s retirement income system is among the worst in the world, according to data released by an Australian research center on Sunday.

The Australian Center for Financial Studies’ October 2012 Melbourne Mercer Global Pension Index showed that Korea ranks 16th among 18 researched countries in terms of the retirement income system, marking an overall index value of 44.7.

Denmark topped the list with 82.9 points. China came in 15th with 45.4 points, Japan 17th with 44.4 points and India 18th place with 42.4 points. The center took into account over 40 indicators for the evaluation.

On a scale of A to E, Korea belonged to category D, which means that the system has some desirable features, but also major weaknesses and/or omissions that need to be addressed.

Reasons for the low grade include the low income-replacement-rate-of-public-pensions, low subscription rate of private pensions, the low fertility rate and an aging society.

The center suggested that Korea’s overall index value could be raised by improving the level of support provided to the poorest pensioners. It could also be improved by introducing a requirement that part of the retirement benefit from private pension arrangements must be taken as an income stream; increasing the level of funded contributions thereby increasing the level of assets over time; increasing the state pension age over time; improving the governance requirements for the private pension system; and improving the level of communication required to members from pension plans.

By Park Min-young  (claire@heraldcorp.com)