According to the Melbourne Mercer Global Pension Index (MMGPI), the Netherlands is back on top! The last time the Netherlands was ranked with the best pension system in the world was seven years ago. Last year, the country ranked second in the world.
This year, the MMGPI celebrates its 10th edition. The Index examines the pension systems in 34 countries according to the sub-indices of adequacy, sustainability and integrity, which are informed by more than 40 indicators. The sub-indices are not equally weighted, adequacy account for 40 percent of the overall score, whilst sustainability contributes 35 percent and integrity 25 percent.
Each aggregate score for a country’s pension system is also related to a grade, ranging from A to E, with the addition of B+ and C+. To achieve an A grade, a country must score higher than 80 out of 100. An E grade equates to a score lower than 35 points.
Adequacy is informed by factors such as benefits, system design, growth assets, tax support, savings and home ownership, whereas sustainability is based on indicators like total assets, contributions, demography, government debt, economic growth and pension coverage. The integrity index looks at indicators such as governance, regulation, costs, communication and protection.
This year, the Netherlands has come out on top, beating Denmark to first place. In particular, the Netherlands scores higher on the integrity sub-index with 88,8/100, giving the country an overall score of 80,3. Denmark comes in a close second, with a score of 80,2, scoring better than the Netherlands on adequacy (77,5) and sustainability (81,8).
The Netherlands and Denmark both achieve an A grade. Interestingly, in the 2018 MMGPI, zero countries receive the B+ grade. This highlights the gap between those countries with a first-class retirement income system and the rest of the countries investigated in the study. Zero countries received an E grade.
This year, the countries with the top 10 world’s best pension systems are as follows.