Allianz Global Pension Report 2025: Time to walk the talk

• Trichotomy: Pension systems worldwide fall into three categories: little need for reform, high need for reform and urgent need for reform
• Savings: The pension gap is large – but not unbridgeable
• Asia: Aging is common but huge disparities in the preparedness of pension systems

Munich, January 21, 2025

Allianz today presented the third edition of its “Global Pension Report”, which analyzes 71 pension systems around the globe with the help of the company's own “Allianz Pension Index” (API). The indicator consists of three pillars: analysis of the demographic and fiscal situation, and an assessment of the sustainability (e.g. financing and contribution periods) and adequacy (e.g. coverage and pension levels) of the pension system. A total of 40 parameters are taken into account, with scores between 1 (no need for reform) and 7 (acute need for reform). The weighted sum of all parameters reflects the pressure for reform in the respective system.

High reform pressure

The unweighted overall score for all pension systems analyzed is 3.7, signaling continued high pressure to reform. Compared to our last report from 2023, there has been some movements – but not always in the right direction: The overall score was at 3.6 at that time. However, there are significant differences between countries. There is a small group of countries, such as Denmark, the Netherlands and Sweden, which with an overall score well below 3 are doing relatively well because they set the course for sustainability in good time by embracing funded systems (see list of best pension systems). At first glance, it may come as a surprise that Japan is also on this list. But like no other country, Japan has consistently taken a different approach: working longer. Even today, one-third of 65- to 70-year-olds are still in employment; in the next few years, the effective retirement age is expected to rise to 70. By far the larger group consists of countries with an overall score below 4, where there is an urgent need for reform to protect the pension systems against the effects of demographic change. This group includes many developing countries such as Malaysia, Colombia and Nigeria. Their problem is often not the design of the pension system per se, but its limited reach: the share of informal employees who are not covered is usually over 50%. In these countries, far-reaching labor market reforms are therefore needed first to create the basis for a comprehensive pension system. Otherwise, the pension system will become yet another factor increasing inequality. Finally, the third group of pension systems includes many European countries such as Germany, France and Italy, whose pension systems have so far taken only tentative steps towards funding – the pay-as-you-go system dominates and the pressure for reform is correspondingly high in view of the rapid aging of societies.

Pension savings gap can be closed

According to Allianz calculations, the pension savings gap for younger generations in the eurozone alone is around 350 billion euros per year on average. That sounds like a lot – but it is bridgeable if the savings rate were to rise by a quarter. “Gen Xers need to save more to ensure their desired standard of living in old age – that's indisputable,” said Ludovic Subran, Chief Economist at Allianz. “But we must not just look at one side of the equation, the savings efforts of households. It is crucial to think about pension security and capital market development together. Retirement savings must be invested profitably in future growth and innovation. This is the key to overcoming demographic change (as well as climate change). Europe still has major deficits in this area.”

Asia: Huge disparities

The 15 Asian markets[1] analyzed in the “Allianz Global Pension Report” have one thing in common: their societies aging rapidly. The average old-age dependency ratio will increase from 19% to 43% over the next 25 years. While there are marked differences in the absolute levels – ranging from 14% in Laos to 95% in Hong Kong in 2050 – the ratio is set to more than double within a generation in all countries (with the only exception of already “old” Japan).

Against this backdrop, there is an urgent need to make the Asian pension systems demography-proof. The region’s average overall score is 3.9 and thus below the global average. However, the reform needs differ from country to country. In the mature markets, like Japan, Hong Kong, Singapore or South Korea, strengthening the pension system’s long-term sustainability gains in importance. In the emerging markets with still rather young populations, like Cambodia, Indonesia or Laos policy makers face the challenge of improving the adequacy of the pension system; this will require the introduction and expansion of fully-funded occupational and private pillars. Another big challenge is the formalization of the labor market, since a large part of the working age population in these countries is still employed in the informal sector without any coverage by the social security system. But there is also one common issue for almost all countries: the relatively low mandatory or minimum retirement age that does not reflect the gains in life expectancy.

[1] Included are Cambodia, China, Hong Kong, India, Indonesia, Japan, Laos, Malaysia, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.