The publication of the 2025 edition of the Mercer CFA Institute Global Pension Index shows that many countries score higher with their pension systems than in the previous year. This also applies to the Dutch system, which, as in 2024, came out as the best worldwide. We asked Alwin Oerlemans, Head of Product Management at APG Asset Management, to elaborate on the results of the research.
After the Netherlands, Iceland, Denmark, Singapore and Israel follow as the highest scoring countries. The pension systems of these five enjoy an 'A-status' on the list, which Mercer describes as ‘a robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity’.
What do you notice about the results of the Mercer study this year?
Alwin: "Every year, a few new countries are included in the index. This year, Kuwait, Namibia, Oman and Panama have been added. And many countries have risen in terms of score. This means that the subject of pensions receives good attention and that countries also look at each other to learn what is and what is not part of a good pension system. In addition, it is striking that the highest category has been expanded to include Singapore, which now occupies fourth place. I have always seen the Singaporean system as a very mature pension system and that is reflected in this study.
In addition to the scores of countries, Mercer's research addresses a specific theme each year. This time it is government policy. To this end, they present eight principles. Four of them are about the rules that a government sets to achieve a good pension system. The other four principles deal with possible government restrictions on the investments of funds.
This year, incidentally, two pages focus on the longevity economy report of the World Economic Forum, of which our CEO Annette Mosman is on the Steering Committee."
What do those two pages say about the longevity economy?
"Basically, it is a call to action to meet the demographic and financial challenges of aging worldwide and to help people become more resilient in their longer lives. The study mentions three main solutions for this. A basic pension that serves as a safety net for all, better access to well-managed, cost-effective pension schemes, and support for initiatives aimed at increasing pension contributions. Specific recommendations are then made, with which you can give shape to those solutions."
The Netherlands is at the top of the list again. Does the study also contain suggestions for improvement for us?
"The Netherlands does indeed score the highest with a total of 85.4. To increase that score even further, three recommendations are mentioned. These are not new to us, by the way. The first is a reduction in household debt, which refers to our high mortgage debts. Another recommendation is the introduction of a second pillar pension for those who spend a large part of their time caring for the children. This recommendation is related to the low labor participation rate of women in the Netherlands, who often work two to three days a week. After all, during the time in which they take care of the children, they do not accrue a second pillar pension. The last recommendation is better protection of the accrued pension rights of participants. This advice is partly the result of the indexation discussions that took place under the nFTK – the old supervisory framework. That is a less important recommendation, with the arrival of the renewed pension system."
The research is based on annual reports for 2024, in which the old pension system was still in force. Will the renewed system lead to an even better score?
"I don't think it really makes a difference. A substantially different score would only arise when the contributions or the way of investing would change very much, or if the costs would rise enormously. None of that is the case in the new system.
By the way, the study is already somewhat ahead, when it comes to the Dutch system change. It is noted that the Netherlands is implementing significant pension reforms, moving from predominantly defined benefit schemes to a system of more defined contribution schemes. But the Netherlands still gets the highest index score. It is anticipated that the new system will probably still offer very good benefits, supported by a strong capital base and very solid regulations."
Would you like to know more about the research? The full report can be found here.