The Netherlands has been crowned as having the world’s best pension system for the second year running, having taken over the lead from second-placed Iceland in 2023. Denmark remained in third place.
The Netherlands had the highest overall value in the 2024 Mercer CFA Institute Global Pension Index, scoring 84.8 out of a maximum of 100 points, a number slightly lower from last year (85 points). It is followed by Iceland (83.4 points), which lost 1.4 points due to a decrease in the net pension replacement rate. Denmark remained in third place with 81.6 points (compared with last year’s 81.3).
The Mercer index uses the weighted average of the sub-indices of adequacy (an indicator of the purchasing power of pensions), sustainability (affordability of pensions) and integrity, related to the quality of supervision and the regulatory framework. For each sub-index, the systems with the highest values were the Netherlands for adequacy (86.3), Iceland for sustainability (84.3) and Finland for integrity (90.8).
Mercer noted that increasing longevity, high interest rates and rising costs of care have put increased pressure on government budgets to support pension programmes, causing scores to be slightly lower this year overall.
The Netherlands’ pension system has continued to be the best system, according to David Knox, a partner at Mercer and the author of the report, even as it moves from a defined benefit (DB) structure to a more individual defined contribution (DC) approach.
“The system also features strong regulations and offers participants guidance regarding their pensions,” according to Knox, who added that the ongoing transition to a DC system did not impact the country’s rating.
“Notwithstanding these changes, the system will continue to provide very good benefits, supported by a strong asset base and very sound regulation,” he said.
In Denmark, the country’s pensions lobby used the news that the Danish pension system once again ranked as the world’s third best to push domestically against recent political moves to change the system.
Lotte Katrine Ravn, chief consultant at Insurance & Pension Denmark (IPD), said: “There is now no doubt that Denmark belongs at the very top among countries with the best pension systems.”
2024 Mercer CFA Institute Global Pension Index
Since the summer, IPD said, the system had been the subject of great debate, regarding the retirement age as well as savings in general.
“Of course it’s positive to look at whether we might be able to organise ourselves better, but we just have to remember that we generally have a very good system and that we should only change after careful consideration,” Ravn said.
Worries in Sweden
Meanwhile, in Sweden, Mercer’s local branch said the report showed Sweden’s pension system up as the worst pension system in the Nordics, and that having dropped this year one place to number 10 in the world, it was now at risk of falling out of the top 10. The country did, however, slightly improve its overall score to 74.3 points, primarily due to an increase in the base pension and the net pension replacement rate.
Oscar Lekander, head of pension and insurance at Mercer Sweden, made several points about what Sweden needed to do to bolster its pension system.
Even though Sweden’s fertility rate is far above the European average of 1.46 per woman, Lekander said: “Sweden’s fertility rate has been below 1.7 children per woman in recent years, which means that we risk a declining population and an ageing population that could challenge the stability of the pension system,” he said.
Positive labour immigration had been important both for Sweden’s labour market and its pension system, he said, adding that events around stricken green battery firm Northvolt were “an example of a worrying situation where these individuals are at risk of having to leave the country,” referring to immigrant staff at Northvolt being put out of work.
“It is crucial that Sweden continues to be an attractive country for labour immigration and that both politicians and businesses work to create good conditions for these important contributors,” he said.
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