After three years at the top of the Global Pension Index, the Netherlands has officially been knocked off the top spot and into second place in the 2021 ranking.
The 2021 Global Pension Index
For over a decade, Mercer, a human resources consulting firm, and the Chartered Financial Analyst (CFA) Institute have worked together, using over 50 indicators across three categories – adequacy, sustainability, and integrity – to rank 43 pensions from countries around the world.
The scores for each category contribute to a country’s final aggregate score, however, each category is weighted differently; adequacy is worth 40 percent of the final score, sustainability 35 percent, and integrity 25 percent.
Each pension system receives an overall score out of 100, which correlates to a grade, running from A to E, depending on the quality and reliability of the system. To achieve an A grade, a country must receive a score of at least 80.
Pension and retirement in the Netherlands
For years, the Netherlands has dominated the ranking, consistently receiving scores above 80 and claiming the number one spot. But, this year’s results are a little mixed for the Netherlands; the country has seen its overall score increase from 82,6 in 2020 to 83,5 out of 100, but, for the first time since 2017, has missed out on the number one spot.
The Netherlands achieved A-grade scores in all three of the categories, improving its scores in both the adequacy and sustainability sub-indices (82,3 and 81,6 respectively), but falling slightly in the integrity index; after receiving 88,9 in 2020, the Netherlands received a score of 87,9 in 2021.
While second-place is certainly something to be proud of, the report does highlight certain changes that could be made to improve the Dutch pension system. The report emphasises that raising the level of household saving, reducing the level of household debt, and increasing the labour force participation rate for older generations as the national life expectancy rises could improve the Netherlands’ overall score.
The best pension systems in the world
According to the 2021 Global Pension Index, the top 10 pension systems in the world are:
- Iceland – 84,2
- The Netherlands – 83,5
- Denmark – 82,0
- Israel – 77,1
- Norway – 75,2
- Australia – 75,0
- Finland – 73,3
- Sweden – 72,9
- UK – 71,6
- Singapore – 70,7
The countries that secured the bottom three places in the ranking are the Philippines (42,7), Argentina (41,5), and Thailand (40,6). For the full report, visit the Mercer website.