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IPE special report May 2018

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Dutch pensions industry tops Mercer Global Pension index

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  • Dutch pensions industry tops Mercer Global Pension index

GLOBAL - The Dutch pensions industry has maintained its top position in the Melbourne Mercer Global Pension index, followed closely by Switzerland and Sweden, while the UK, France and Germany have been ranked sixth, tenth and eleventh, respectively.

The Netherlands recorded the highest score in the index - which assesses adequacy, sustainability and integrity - for the third year running, totalling an overall index value of 78.3 out of 100.

Published by the Australian Centre for Financial Studies (ACFS), the report - which compares the retirement income systems of 14 countries across five continents - also notes that the Dutch index value increased from 76.1 in 2009 to 78.3 in 2010 due to the level of mandatory contributions actually operating within the country.

However, the Netherlands could improve its position by introducing several measures, according to the report.

First, it could implement a minimum access age so that it is clear benefits are preserved for retirement purposes, as well as raise the level of household saving.

The ACFS also suggested the Netherlands should increase the labour force participation rate among older workers and provide greater protection of members' accrued benefits in the case of fraud, mismanagement or employer insolvency.

ACFS director, professor Deborah Ralston, said: "Western societies with lower birth rates and increased longevity are increasingly challenged to provide an adequate benefit to retirees and generally meet the needs of an ageing population.

"Retirement systems tend to be best developed in the Scandinavian countries, and least well developed in Asia."

Top marks in the index also went to Switzerland with a score of 75.3 and Sweden with 74.5.

Coming in second position with an overall index value of 75.3, Switzerland could see its index rising in the future with the introduction of a requirement that would mean retirement benefits are taken as an income stream, the report said.

According to the index, the country should also increase the state pension age, as well as introduce a universal requirement to permit individuals to retire gradually while receiving a part pension.

In addition, Sweden, which saw its overall index score rise from 73.5 in 2009 to 74.5 in 2010, should also raise the state pension age to better reflect the increase in life expectancy, encourage employee contributions into employer-sponsored plans, improve the requirements in respect of the annual information provided to plan members and introduce arrangements to protect all the pension interests of both parties in a divorce.

Further down the pecking order, the UK, France and Germany have put in place systems that provide good features, according to the report, but still have major risks and shortcomings that should be addressed.

The report insists that, without these improvements, the efficacy and the long-term sustainability of these systems could be questioned.

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