Replacement look only at the benefit level relative to individual earnings at the point of retirement, or at a given, later age. For a full picture, life expectancy, normal retirement age and indexation must also be considered. Together, these determine for how long the pension is paid, and how its value evolves over time. Net pension wealth – a measure of the stock of future discounted flows of pension benefits after taxes and social contributions – takes account of these factors. It is the total net benefits that will be received on average from the mandatory retirement-income schemes.

In defined benefit systems there is often no or a weak link between the replacement rate and the expected duration of benefit withdrawal. In the long run, ensuring financial sustainability imposes a trade‑off between the two. When retirement ages and pension benefits are held constant, pension wealth increases with longevity gains. In defined contribution systems there is a more direct link between the size of the benefit and the expected duration of withdrawals. In these systems the pension wealth measure is equal to the accumulated assets and therefore independent of longevity increases as these automatically reduce the benefits.

Net pension wealth at individual earnings equal to average worker earnings is highest in China at 20.3 times annual individual net earnings for men and 20.1 times for women (Table 2.5). The lowest pension wealth for men is found in Pakistan at 6.1 and for women in Sri Lanka at 6.6.

Higher individual replacement rates and the increased tax allowance for many pensioners mean that net pension wealth relative to individual net earnings tends to be higher for low earners than for average earners as well, at least as the estimations here abstract from differences in life expectancy across income levels. For men with individual earnings equal to half-average earnings, net pension wealth is 12.6 times their net earnings on average, compared with 11.0 times for average wage workers. Similarly, for women it is 13.6 for half-average earners and 11.8 times for average earners.

For higher earners net pension wealth is on average 9.1 for men and 9.6 for women, only slightly lower than that for average earners, with China highest and Pakistan lowest.

Where the duration in retirement is shorter and where pension benefits are defined benefit, e.g. in Indonesia and Pakistan, the individual pension wealth is smaller. The effect is the opposite in Hong Kong (China) and Singapore, where life expectancies are high. Similarly, since women’s life expectancy is longer than men’s, pension wealth for women is higher when unisex mortality tables are used or there are defined benefit systems. In that latter case the same level of pension benefits can be expected to be paid over a longer retirement period. Some countries have lower retirement ages for women; extending the payment period even further.

Net pension wealth is the present value of the flow of pension benefits, taking account of the taxes and social security contributions that retirees must pay on their pensions. It is measured and expressed as a multiple of net annual individual earnings in the respective country.

Taxes and contributions paid by pensioners are calculated conditional on the mandatory pension benefit to which individuals are entitled to at different levels of earnings. The calculations take account of all standard tax allowances and tax reliefs as well as concessions granted either to pension income or to people of pension age.

Details of the rules that national tax systems apply to pensioners can be found in Chapter 4 for the Asian economies and in the online “Country Profiles” available at https://www.oecd.org/en/topics/sub-issues/public-pensions.html for OECD countries.