A well-designed retirement system plays a crucial role in ensuring financial security for retired citizens, offering a guaranteed and reasonable income throughout their later years. However, not all countries meet this ideal, with some lagging behind in providing adequate retirement provisions.
To identify the countries with the best retirement systems and understand their qualifications, GOBankingRates analyzed data from the 2023 Mercer CFA Institute Global Pension Index. This index evaluates 47 retirement income systems worldwide based on adequacy, sustainability, and integrity, assigning letter grades from A to E to reflect their performance.
Here are the top three countries with the best retirement systems, listed in descending order, along with an overview of the United States’ standing:
1. Netherlands
Grade: A
Overall Index Value: 85.0
Adequacy Sub-Index: 85.6
Sustainability Sub-Index: 82.4
Integrity Sub-Index: 87.7
Ranking Analysis: Despite undergoing significant pension reform, the Netherlands secured the top spot due to its robust asset base, solid regulation, and commitment to providing excellent benefits.
2. Iceland
Grade: A
Overall Index Value: 84.8
Adequacy Sub-Index: 85.5
Sustainability Sub-Index: 83.8
Integrity Sub-Index: 85.0
Ranking Analysis: With high scores in adequacy and sustainability, Iceland ranks second overall, boasting a state pension system supported by both mandatory and voluntary contributions.
3. Denmark
Grade: A
Overall Index Value: 81.3
Adequacy Sub-Index: 82.5
Sustainability Sub-Index: 82.5
Integrity Sub-Index: 77.8
Ranking Analysis: Denmark’s multifaceted retirement system includes a mix of public and private schemes, contributing to its strong performance in adequacy and sustainability, despite a lower integrity ranking.
The United States in the Index:
Grade: C+
Overall Index Value: 63.0
Adequacy Sub-Index: 66.7
Sustainability Sub-Index: 61.1
Integrity Sub-Index: 59.5
Ranking Analysis: Placing 24th for adequacy, 16th for sustainability, and 41st for integrity, the U.S. demonstrates room for improvement in limiting pre-retirement fund access to mitigate leakage.
Overall, understanding the strengths and weaknesses of different retirement systems is crucial for policymakers and citizens alike as they work towards ensuring financial security in retirement.
