The 2024 Global Pension Index by Mercer has seen Switzerland slip down the order of the best pension systems in the world. As the Netherlands retained first place for the second year running, the alpine nation’s score worsened, though remains above average by global comparison.

Global Pension Index 2024 by Mercer

Created by human resources firm Mercer and the Chartered Financial Analyst (CFA) Institute, the Global Pension Index seeks to rate 48 pension systems by what they offer retirees, whether they are financially viable for the future and how reliable they are at ensuring benefits. Each system was rated through the following three categories:

• Adequacy (benefits, system design, savings, tax support, home ownership and growth assets)
• Sustainability (pension coverage, total assets, contributions, demography, government debt and economic growth)
• Integrity (regulation, governance, protection, communication and operating costs)

Scores in each of the categories contribute to the country’s final aggregate score, although each is weighted differently - adequacy is worth 40 percent of the final score, sustainability 35 percent and integrity 25 percent. Based on the aggregate score out of 100, each country is assigned a grade from A to E, with A only awarded to countries with scores of 80 points or higher.

For 2024, Mercer wrote that retirees are coming under increasing pressure thanks to inflation and rising interest rates, which heavily impact the elderly on pensions which are not indexed to rising costs. At the same time, European nations face an ageing population which could throw the financial viability of programmes into doubt - in Switzerland for example, a quarter of the workforce is expected to be retired by the end of the decade.

Dutch pension system rated the best in the world

The top of the 2024 list saw the return of a familiar face, with the Netherlands rated as having the best pension system in the world with a score of 84,8. They were joined by Iceland, Denmark and Israel in the top four, and as the only countries given an A rating by the ranking.

Mercer wrote that despite undertaking “significant pension reform…the [Dutch pension system] will continue to provide very good benefits, supported by a strong asset base and very sound regulation.” However, they noted that the Dutch score could be improved by reducing levels of household debt and providing more benefits for those caring for children. 

By contrast, India was rated as having the worst pension system of the 48 analysed. Though progress has been made, the study called on the Indian government to expand social security programmes to provide coverage to more people earlier, especially low earners.

Financial health of Swiss pensioners remains a concern

Further down the ranking, the Swiss pension system and its three pillars were rated as the 12th best in the world, a one-position drop compared to 2023. Earning a B score overall, the alpine nation took 9th best for sustainability, 15th for integrity and a less-than-stellar 26th for adequacy.

Switzerland’s worse performance in 2024 was blamed on a decline in pension payments when compared to average salaries. Though a majority of Swiss pensioners report being financially secure, the latest data from the Federal Statistical Office noted that retirees remain some of the most at risk of poverty. A recent study by VZ Asset Center noted that many pensioners continue to underestimate how much money they need to retire in Switzerland.

Reform needed to guarantee the pension system in Switzerland, says Mercer

However, more is being done to ease the financial gap: in March, Swiss citizens approved giving retirees a 13th month of first pillar pension and scrapped an increase in the retirement age, while in September voters rejected reforms to second pillar plans that would have reduced payments to some pensioners.

In all, Mercer suggested various measures to ensure the health of the Swiss pension system. These included a requirement to take a part of first and second-pillar pensions as an income stream rather than a lump sum, increasing the pension age in line with life expectancy and, though they don’t explain how, increasing the number of people who own a home in Switzerland.

Best pension systems in the world revealed

In all, here are the 10 countries with the best pension systems in the world:

1. The Netherlands (84,8)
2. Iceland (83,4)
3. Denmark (81,6)
4. Israel (80,2)
5. Singapore (78,7)
6. Australia (76,7)
7. Finland (75,9)
8. Norway (75,2)
9. Chile (74,9)
10. Sweden (74,3)

For more information, and to see how other countries ranked, check out the official website.

Thumb image credit: Alexandros Michailidis / Shutterstock.com