Netherlands retains top spot in Mercer’s Global Pension Index

The Netherlands’ pension system has retained its first place ranking in the Mercer CFA Institute Global Pension Index with an overall score of 82.6.

Denmark was ranked second with a score of 81.4, while Finland came fifth with a score of 72.9.

European pension systems faired reasonably well on the whole, with five participants in the top 10.

Italy scored lowest of the European nations assessed (29th), with an overall score of 51.9 and the lowest score of any nation in the index for sustainability (18.8).

Austria narrowly beat Italy to 28th place with an overall score of 52.1.

The index is measured using three categories – adequacy, sustainability, and integrity, weighted 40 per cent, 35 per cent and 25 per cent, respectively.

Adequacy is calculated on benefits, system design, savings, government support, home ownership and growth assets, with Netherlands achieving first place in this category with 81.5.

Sustainability is measured on pension coverage, total assets, demography, public expenditure, government debt, and economic growth, with Denmark coming out on top with a score of 82.6.

Integrity is calculated on regulation, governance, protection, communication, and operating costs. Finland scored highest on integrity with a score of 93.5.

Other European nations on the list included Sweden and Norway (joint sixth), Germany (11th), Switzerland (12th), Ireland (14th) the UK (15th) and Belgium (16th).

In the index, Mercer acknowledged the impact that Covid-19 had had on pension systems, highlighting that the average sustainability score fell by 1.2 in 2020 due to the negative economic growth experienced in most economies.

It noted that the pandemics impact on future pension provision will be negative due to reduced contributions, lower investment returns and higher government debt.

“Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement,” commented Mercer senior partner, Dr David Knox.

“It is critical that governments reflect on the strengths and weaknesses of their systems to ensure better long-term outcomes for retirees.”

Monash Centre for Financial Studies director, Professor Deep Kapur, added: “The outlook for investment returns is muted while volatility may be elevated, adding to the normal challenges of risk management in a pension portfolio.

“Additionally, some governments have allowed temporary access to saved pensions or reduced the level of compulsory contribution rates to improve liquidity positions of households.

“These developments will likely have a material impact on the adequacy, sustainability and integrity of pension systems, thereby influencing the evolution of the Global Pension Index in the coming years.”

The index measured a total of 39 nations’ pension systems.

    Share Story:

Recent Stories


Podcast: The benefits of private equity in pension fund portfolios
The outbreak of the Covid-19 pandemic, in which stock markets have seen increased volatility, combined with global low interest rates has led to alternative asset classes rising in popularity. Private equity is one of the top runners in this category, and for good reason.

In this podcast, Munich Private Equity Partners Managing Director, Christopher Bär, chats to European Pensions Editor, Natalie Tuck, about the benefits private equity investments can bring to pension fund portfolios and the best approach to take.

Podcast - The power of three: Using Common Contractual Funds to improve tax outcomes for investors
Large asset owners are still investing in equities in a way where they are taxed on their income. The implication is that they get a poorer return. They need to, and can, improve this, but how?

In this podcast, AMX Head of Client and Manager Development, Aaron Overy, and AMX Product Tax Specialist, Kevin Duggan, discuss with European Pensions Editor, Natalie Tuck, about three options to help ensure good withholding tax outcomes for institutional investors.

Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows