MMGPI reveals the Netherlands and Denmark as top performers

MMGPI reveals the Netherlands and Denmark as top performers

The Netherlands and Denmark are both leading the way in offering “A”-grade, world-class retirement income systems with good benefits, according to the Melbourne Mercer Global Pension Index (MMGPI).

Measuring 34 pension systems, the MMGPI shows that the Netherlands and Denmark (with scores of 80.3 and 80.2 respectively) are demonstrating their preparedness for tomorrow’s ageing world.

But there is a growing tension between adequacy and sustainability, particularly in Europe. Denmark, Netherlands and Sweden scored “A” or “B” grades for both adequacy and sustainability, whereas Austria, Italy and Spain scored a “B” grade for adequacy but an “E” grade for sustainability.

Author of the study and senior partner at Mercer Australia, Dr David Knox, said that the natural starting place to having a world-class pension system is ensuring the right balance between adequacy and sustainability.

“It’s a challenge that policymakers are grappling with,” said Dr Knox. “For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is—what’s an appropriate trade-off?”

Dr Knox added that it’s not enough for a system to be sustainable or adequate; an emerging dimension to the debate about what constitutes a world-class system is “coverage” and the proportion of the adult population participating in the system.

He said: “In some countries, broad coverage has been successfully accomplished through compulsory workplace pension systems or, in some cases, auto-enrolment arrangements.”

“However, with changes in the way people are working around the world, we need to ensure these schemes include everyone so that the whole workforce is saving for the future. This includes contractors, self-employed, and anyone on any income support, be that parental leave, disability income or unemployed benefits.”

David Anderson, president of international at Mercer, added that it was a positive step to see governments tackle pension reform as life expectancies continue to rise.

He said: “Developed economies have been aware of the demographic challenges facing their pension systems for some time. Where economies are less developed, it’s pleasing to see many governments recognising the same trends emerging in their own populations and taking steps now to address this. Such actions make future pension systems more sustainable over the longer term.”

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