Global Pension Index 2023: Countries With The Best Pension System

The 15th annual Mercer CFA Institute Global Pension Index (MCGPI) recently revealed the ranking of retirement income systems in various countries. The Netherlands secured the top position, followed by Iceland and Denmark. India showed improvement, moving up to the 45th rank out of 47 systems analyzed.

Key Rankings

Netherlands on Top: The Netherlands had the highest overall index value (85.0), making it the best in the world.
Iceland and Denmark: Iceland (83.5) and Denmark (81.3) claimed the second and third positions in the ranking, respectively.
Argentina at the Bottom: Argentina had the lowest index value (42.3).

India’s Performance

India’s Rank: India ranked 45th out of 47 countries.
Improved Score: India’s overall index value increased to 45.9 from 44.5 in 2022, primarily due to improvements in adequacy and sustainability sub-indices.

Global Coverage

Global Pension Index: It compares retirement income systems in 47 countries, covering 64% of the world’s population.
Three New Systems: The 2023 Global Pension Index added Botswana, Croatia, and Kazakhstan to the analysis.

Global Challenges

Aging Populations: Rising average ages in many countries, especially mature markets, pose challenges for pension plans.
Economic Impact: Factors like inflation and rising interest rates affect pension systems and retirees.
Globalization Changes: Pension funds face challenges due to changes in globalization trends.

Reforms and Adaptations

Asian Systems: Several Asian countries, including mainland China, Korea, Singapore, and Japan, have undertaken reforms to improve their pension system scores in the last five years.

India’s Retirement System

Components: India’s retirement income system consists of an earnings-related employee pension scheme, a defined contribution (DC) employee provident fund (EPFO), and supplementary employer-managed pension schemes, which are mainly DC.
Social Security Program: The government schemes aim to benefit the unorganized sector and are part of the universal social security program.

Challenges Ahead

Individual Responsibility: Individuals are expected to play a more significant role in their retirement planning.
Long-Term Security: The index emphasizes the need for improvement in pension plans to ensure long-term financial security for beneficiaries.

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