According to a research by Mercer, The Netherlands has the best pension system in the world. This is the conclusion of Mercer in their annual Global Pension Index (MMGPI). After 7 years, the Netherlands is back on top again, taking over first place from Denmark.
31 Oct 2018
The Global Pension Index examines the pension systems of 34 countries worldwide for adequacy, sustainability and integrity. This year, the Netherlands scored 80.3 points and surpassed Denmark (80.2) with a 0.1-point difference. Both countries were given the A-status in this year's MMGPI. Finland completes the top three with 74.5 points.
The Netherlands scored highest and receives A-status
According to Mercer, little has changed in the pension system itself compared to last year. It is mainly external factors, such as economic growth, that led to higher scores for the Netherlands. The Netherlands has had a solid, state-funded, basic pension system (AOW-system) for years. But it is above all the strong interdependence of the occupational pension scheme (the so-called 'second pillar') that resulted in the Netherlands gaining the number one position in this year's survey. The increase in the state funded pension age to 66 (from 65), yielded additional points for the financial sustainability of our pension system.
In order to maintain the A-status by reducing its debt and increasing the amount of savings per household. In addition, it is necessary to further improve the pension system by encouraging participation in employment at a higher age, in line with rising life expectancy.
Is the Dutch pension system future-proof?
With pension assets of EUR 1362 billion, the Dutch have collectively saved a large sum of money for their old age. But is the Dutch pension system really future-proof? Denmark scored 81.8 on the sustainability sub-index, compared to 79.2 for the Netherlands. According to Mercer, this is partially because the Dutch pension system is complex and offers little freedom of choice. Even though the government and the labour unions have been discussing on pension reforms for years. A reform is urgently needed, especially in view of recent (economic) developments:
- the current Dutch pension system is not sufficiently prepared for the needs in the changing labour market (including self-employed people),
- the pension system is dealing with low interest rates,
- life expectancy is increasing,
- no indexation has taken place for years, despite economic growth.
As a result, the Dutch have little confidence in their pension system. To restore that trust, necessary changes are required. It is therefore very uncertain whether the Netherlands will still be at the top of Mercer's ranking in the coming years. The Dutch pension system needs to be modernised. The call for maintaining a solid and robust pension system is growing. Developments at the pension reform negotiating table, between the labour unions and the government, need to come soon.