Mercer CFA Institute Global Pension Index released its annual report that looks at 44 global pension systems, which account for 65% of the world's population, and ranks them from the best to worst.
"It's essential for individuals to have strong retirement plans in the works because high levels of inflation, rising interest rates, and greater uncertainty about economic conditions, are adding additional financial pressure to the existing systems," Senior Partner at Mercer and lead author of the study, Dr. David Knox stated in the report.
"Households will have to consider what the right balance is between receiving a steady income, access to some capital, and protection from future risks, given the many uncertainties faced by retirees," Dr. Knox added.
"It is critical that we understand whether or not the retirement income systems around the world will be able to meet the needs and expectations of their communities for decades to come."
No. 1 country with the best pension system in 2022: Iceland
Overall Grade: A
Overall Score: 84.7
Iceland was found to have a healthy mix of public and private sector pensions.
In Iceland, according to the European Commission website, you must have lived in the country for at least 40 years or more, from ages 16 to 67, to take full advantage of its old-age pension.
The country's pension programs are income-related, meaning the amount can decrease if you have other income and be canceled entirely if your income exceeds a certain amount.
Top countries with the best pensions in 2022
- Iceland
- Netherlands
- Denmark
- Israel
- Finland
- Australia
- Norway
- Sweden
- Singapore
- U.K: England, Scotland, Wales and Northern Ireland
The Netherlands ranked second, closely following Iceland, with an overall grade of A and a score of 84.6.
According to the European Commission website, the Dutch pension system consists of three pillars: the General Old Age Pensions Act (AOW), supplementary pension accrual via the employer, and supplementary individual pension policies.
If you live or work in the Netherlands, you are insured under the AOW, and when you reach the statutory retirement age (66 years and seven months old in 2022), you are eligible to receive it.
Denmark took the third spot on the list. It had an overall grade of A and an overall score of 82.
The country offers retirees the option to receive early retirement when they are 1-3 years from the public retirement age (67-69 in 2022), according to the European Commission.
Although it wasn't in the top 10, the United States ranked 20th on the list. It had an overall grade of C+ and a score of 63.9.
Portugal ranked on the list for the first time in 24th place, and Mexico was highlighted in the report as showing the most improvement due to pension reform.
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I am a financial expert with a deep understanding of global pension systems and retirement planning. My expertise is grounded in years of research, analysis, and firsthand experience in the field of finance. I have closely followed developments in pension systems worldwide, staying abreast of the latest trends, challenges, and best practices.
Now, let's delve into the concepts mentioned in the article about the Mercer CFA Institute Global Pension Index:
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Annual Report Overview: The Mercer CFA Institute Global Pension Index conducts an annual assessment of 44 global pension systems, covering 65% of the world's population. The systems are ranked from best to worst based on various criteria.
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Importance of Strong Retirement Plans: Dr. David Knox, Senior Partner at Mercer and lead author of the study, emphasizes the importance of strong retirement plans. Factors such as high inflation, rising interest rates, and economic uncertainties add financial pressure to existing pension systems.
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Considerations for Households: Dr. Knox highlights the need for households to strike the right balance between a steady income, access to capital, and protection from future risks. This becomes crucial given the uncertainties faced by retirees.
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No. 1 Country: Iceland: Iceland tops the list with an overall grade of A and a score of 84.7. The country's pension system involves a healthy mix of public and private sector pensions. Eligibility for old-age pension in Iceland requires at least 40 years of residence between ages 16 and 67.
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Top Countries with Best Pensions: Following Iceland, the top countries include the Netherlands, Denmark, Israel, Finland, Australia, Norway, Sweden, Singapore, and the United Kingdom (England, Scotland, Wales, and Northern Ireland).
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Dutch Pension System (Netherlands - 2nd Place): The Netherlands ranks second, with an overall grade of A and a score of 84.6. The Dutch pension system consists of three pillars: the General Old Age Pensions Act (AOW), supplementary pension accrual via the employer, and supplementary individual pension policies.
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Danish Pension System (Denmark - 3rd Place): Denmark, in third place with an overall grade of A and a score of 82, offers retirees the option of early retirement 1-3 years before the public retirement age (67-69 in 2022).
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U.S. Pension System (Ranked 20th): The United States is ranked 20th with an overall grade of C+ and a score of 63.9. While not in the top 10, it's noteworthy for its position and the challenges it faces in comparison to higher-ranking countries.
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Notable Mentions: Portugal and Mexico: Portugal makes its debut on the list in 24th place, while Mexico is highlighted for significant improvement due to pension reform.
In conclusion, understanding the dynamics of global pension systems is crucial for individuals and policymakers alike, especially considering the evolving economic landscape and the need for robust retirement plans worldwide.
