The Netherlands has risen to second position in the Melbourne Mercer Global Pension Index which looks at the pension systems of 25 countries worldwide.
The Australian Centre for Financial Studies (ACFS), together with Mercer, created the index. Currently in its seventh year, the index provides a valuable contribution to the global debate about how to best provide for an ageing population.
The Dutch index value increased from 79,2 in 2014 to 80,5 in 2015, primarily due to a higher household saving rate.
Overall Denmark topped the index with a score of 81,7. Australia showed the highest percentage for adequacy; Denmark for sustainability and Finland topped in the integrity sub-index.
| Rank | Country |
|---|---|
| 1 | Denmark |
| 2 | The Netherlands |
| 3 | Australia |
| 4 | Sweden |
| 5 | Switzerland |
| 6 | Finland |
| 7 | Canada |
| 8 | Chile |
| 9 | United Kingdom |
| 10 | Singapore |
The index uses three sub-indices to measure each country’s retirement income system: adequacy (40 percent), sustainability (35 percent) and integrity (25 percent).
The adequacy sub-index represents the benefits that are currently being provided by a country such as tax support, savings and growth assets.
The sustainability sub-index has a focus on the future and measures various indicators, such as government debt and demographics, which will influence the likelihood that the current system will be able to provide these benefits into the future.
The integrity sub-index considers several items that influence the overall governance and operations of the system which affects the level of confidence that the citizens of each country have in their system.
The Netherlands and Denmark are the only two countries that have been given an A-grade for their pension systems - meaning they have a first-class, robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity.
One of the main reasons for the Netherlands’ high rank is due to the significant increase in its household savings rate and that it has pension assets worth 160 to 170 percent of its GDP.
The Dutch pension system comprises a flat-rate public pension and a mandatory earnings-related occupational pension linked to industrial agreements. The current Dutch retirement age is 65 years and will rise gradually over the coming years to 67 years in 2021.
According to Mercer, a global consulting leader in talent, health, retirement and investments, the Dutch system could score more by implementing the following measures:
› Introducing a minimum access age so that it is clear that benefits are preserved for retirement purposes.
› Raising the level of household saving.
› Increasing the labour force participation rate at older ages.
› Providing greater protection of members’ accrued benefits in the case of fraud, mismanagement or employer insolvency.
The Netherlands was ranked sixth out of 96 countries in the Global AgeWatch Index earlier this year.