The latest Global Pension Index by Mercer has rated which countries around the world have the best and worst pension systems. In a year that saw the Netherlands reclaim its crown at the top of the ranking, the three pillars of Swiss pensions narrowly missed out on the top 10.

Global Pension Index 2023

Every year since 2009, the human resources firm Mercer and the Chartered Financial Analyst (CFA) Institute have come together to rank pension systems around the world, to see which are the best and most sustainable. This year, 47 nation’s pension systems - representing 64 percent of the global population - were ranked using the following criteria:

• 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.

Global pension systems under increased pressure

In the report for 2023, Mercer noted that pensioners around the world are "facing increasing risks with the re-emergence of inflation and rising interest rates.” They noted that many governments are having to deal with the fact that heightened inflation is impacting pensioners right at the moment when reforms - and some argue cuts - are needed to ensure the pension system’s liquidity as fewer people work and more people retire - the Swiss government estimates that around a quarter of the population will be retired by 2030.

Quoting the Organisation for Economic Cooperation and Development (OECD), the report added that “the current financial and economic uncertainty, as well as the rising cost of living, may lead policymakers, regulators and supervisors to postpone reforms that could improve their pension systems. However, delaying needed reforms would put at risk the well-being of current and future pensioners.”

The Netherlands has the world's best pensions

This year saw the Netherlands retake the top spot as the best pension system in the world, achieving A grades in all categories and increasing their overall score to 85. Iceland, Denmark, and Israel rounded out the top four as the only countries rated as having “first-class and robust” pension systems.

By contrast, Thailand, Turkey, the Philippines, Argentina and India occupied the bottom of the list. Pension systems in these countries were deemed to have “some desirable features” but also “major weaknesses and / or omissions that need to be addressed.”

Switzerland ranks 11th for pensions in 2023

In 2023, Switzerland was rated as having the 11th-best pension system in the world with a reduced score of 72, a point off 10th and behind the likes of Australia, Finland and Singapore. The Swiss system was given a “B”, meaning that it “has a sound structure, with many good features but has some areas for improvement.”

Specifically, Switzerland was given praise for the “integrity” and “sustainability” of its pension system - likely due to the recent raising of the retirement age for women to be in line with men, which passed by referendum last year. However, the alpine nation faltered when it came to how adequate mandatory pension payments (OASI and AHV) are in comparison to the rising cost of living and housing.

As part of the report, Mercer also provided three suggestions as to how Switzerland could improve its pension system and its stability. These included requiring that a least one of the pension pillars be taken out as an income stream instead of as a lump sum, increasing the pension age in line with life expectancy and, though it doesn’t explain how, increasing the number of people who buy and own property to ensure housing security.

Which countries of the world have the best pension systems?

In all, here are the countries deemed to have the best pension systems in 2023 and their Mercer scores:

1. The Netherlands (85)
2. Iceland (83,5)
3. Denmark (81,3)
4. Israel (80,8)
5. Australia (77,3)
6. Finland (76,6)
7. Singapore (76,3)
8. Norway (74,4)
9. Sweden (74)
10. United Kingdom (73)

For more information, check out the official study.