Comparison of Singapore’s CPFLife and Denmark’s Pension Schemes against the world bank’s 5 pillar model

This paper seeks to analyse the ability of different pension systems to cope with the pressures of population aging. We chose 2 distinct pension systems: Singapore’s CPFLife and Denmark’s pension system where one is mainly self-funded while the other is financed by a pay-as-you-go structure. To ensure that both systems are compared on a similar platform, we compared them with the World Bank’s 5 Pillar Model. This model was devised by the World Bank to evaluate the feasibility of different pension systems. In this model, pension systems have to fulfil 6 criterions: Sustainability, Adequacy, Affordability, Predictability, Robustness and Equitability. To investigate the ability of these 2 pension systems to provide for their people, we came up with 3 fictitious characters, each belonging to different income groups. We compared the payments to each pension scheme and the benefits received upon retirement. We also included supporting evidences such as replacement ratio and breakeven age to consider the financial burden on the state. Through our results, we discovered that the Singapore’s model is more pragmatic as compared to the Danish model which provides generous payouts to their retirees. However, the generous payouts to retirees in Denmark come at the price of higher income tax rates. Each pension system has its weaknesses in different areas which are improved through complementary policies. Hence, we conclude that there is no one perfect pension model that is suitable for every country and that a comprehensive pension system can adopt different structures, as long as they serve the needs of its people.Bachelor of Art