It achieved an overall score of 73, which was 0.7 lower than its score in 2022
The UK has been ranked as the 10th best pension system in the world by the Mercer CFA Institute Global Pension Index, the same position as in 2022.
It achieved an overall score of 73, which was 0.7 lower than its score in 2022.
Countries’ overall scores are a weighted average of three sub-indexes, with the UK scoring 77.3 for adequacy, 62.7 for sustainability, and 80.6 for integrity.
As reported by European Pensions, The Netherlands reclaimed the top spot of the Mercer CFA Institute Global Pension Index, ranking highest of the pension systems evaluated with a score of 85.
It replaced Iceland from the top of the leaderboard in the 2023 index, which moved down to second with a score of 83.5.
The Netherlands scored 87.7 for integrity, 85.6 for adequacy, and 82.4 for sustainability, while Iceland scored 80, 85.5, and 83.8 for each category respectively.
This year’s index marks the first time the Netherlands has been ranked as having the best pension system since 2020, with Iceland at the top in 2021 and 2022.
Denmark and Israel were the other countries to get an ‘A’ grade, with scores of 81.3 and 80.8 respectively, while Australia was the other among the top five with a score of 77.3.
Finland (76.6) and Norway (74.4) ranked sixth and eighth respectively, with both of them scoring highly on integrity but low on sustainability.
Sweden and the UK were also among the top 10, in ninth and 10th, with scores of 74 and 73 respectively.
European countries dominated the top 30, with over half (16) of the top 30 pension systems being in Europe.
For each sub-index, the highest values were Portugal for adequacy (86.7), Iceland for sustainability (83.8), and Finland for integrity (90.9).
The systems with the lowest values across the sub-indices were South Korea for adequacy (39.0), Austria for sustainability (22.6), and the Philippines for integrity (25.7).
Mercer and the CFA noted that declining birth rates had put pressure on several economies and pension systems over the longer terms, affecting the sustainability scores for countries such as Italy (23.7) and Spain (28.5).
Argentina had the lowest overall score of the countries assessed with 42.3, while Austria scored lowest of the European countries assessed with 52.5.
The average age of populations around the world continues to increase in many markets, mainly more mature markets, said CFA Institute president and Chief Executive Officer, Margaret Franklin.
Inflation and increasing interest rates have created a new market dynamic that poses considerable challenges to pension plans. We also see continued fracturing as it relates to globalisation. These are just a few of the increasingly complex challenges that pension funds face that affect retirees in significant ways, she said.
More and more often, individuals will have an increasingly vital role to play as it relates to their own retirement. As investment professionals, we need to assist them prepare for that, Franklin added.
She said: Each year, this index serves as a crucial reminder that there is a long way to go in many jurisdictions to make pension plans function at their best and for the long-term financial security of beneficiaries.