The Allianz Global Pension Report takes the pulse of pension systems around the world with our proprietary pension indicator, the Allianz Pension Index (API). The index follows a simple logic: It starts the analysis with the demographic and fiscal prerequisites and then continues to examine pension systems along their two decisive dimensions: sustainability and adequacy. Hence, it is based on three sub-indices and takes all in all 30 parameters into account, which are rated on a scale of 1 to 7, with 1 being the best grade. By adding up all weighted subtotals, the API assigns each of the analyzed 70 countries a grade between 1 and 7, thus providing a comprehensive view of the respective pension system.
The dramatic shift in demographics is best characterized by the increase in the global old-age dependency ratio: until 2050, it will grow by a whopping 77% to 25%, 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% to 44%. For industrialized countries, however, the absolute level of this ratio is the main reason for concern, reaching, for example, 51% in Western Europe.