Global Pension Index ranked the systems on adequacy, sustainability, and integrity.
The 15th annual Mercer CFA Institute Global Pension Index (MCGPI) has been published, and it shows that the Netherlands' retirement income system has once again secured the first position. Iceland and Denmark have claimed the second and third positions in the ranking, respectively.
The Netherlands had the highest overall index value (85.0), closely followed by Iceland (83.5) and Denmark (81.3). Argentina had the lowest index value (42.3), it added.
India had an overall index value of 45.9 from 44.5 in 2022, ranking 45 out of the 47 retirement income systems analyzed primarily due to improvements in adequacy and sustainability sub-indices, according to the 15th annual Mercer CFA Institute Global Pension Index (MCGPI).
This year, the Global Pension Index compares 47 retirement income systems across the globe and covers 64 per cent of the world's population.
The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability, and integrity to measure each retirement system against more than 50 indicators.
The 2023 Global Pension Index includes three new retirement income systems: Botswana, Croatia, and Kazakhstan.
The report also revealed that falling birth rates have put pressure on several economies and pension systems over the longer term, negatively affecting the sustainability scores of countries like Italy and Spain.
Several Asian systems, however, including mainland China, Korea, Singapore, and Japan, have undertaken reforms to improve their scores in the last five years.
The report further stated that India's retirement income system comprises an earnings-related employee pension scheme, a DC (defined contribution) employee provident fund (EPFO), and supplementary employer-managed pension schemes that are largely DC in nature.
The government schemes have been launched as part of the universal social security program aimed at benefiting the unorganised sector, according to the report.
"The average age of populations around the world continues to rise in many markets, mainly more mature markets," said Margaret Franklin, CFA, President and CEO, CFA Institute. "Inflation and rising interest rates have created a new market dynamic that poses significant challenges to pension plans. We also see continued fracturing as it relates to globalization. These are just a few of the increasingly complex challenges that pension funds face that impact retirees in significant ways.
"More and more often, individuals will have an increasingly important role to play as it relates to their own retirement. As investment professionals, we need to help them prepare for that. Each year, this index serves as a critical reminder that there is a long way to go in many jurisdictions to make pension plans function at their best and for the long-term financial security of beneficiaries."
(With inputs from agencies)