The Netherlands and Denmark have the strongest pensions systems in the world, while Thailand and Argentina have the worst pension systems according to a recent study released by professional services firm Mercer.
The study analyzed 37 retirement income systems representing more than 63% of the world’s population and found a wide gap among systems around the world, with scores ranging from a high of 81.0 for the Netherlands to a low of 39.4 for Thailand.
“Systems around the world are facing unprecedented life expectancy and rising pressure on public resources to support the health and welfare of older citizens,” David Knox, author of the study, said in a release. “It’s imperative that policy makers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future.”
As the top ranked systems, the Netherlands and Denmark were also the only countries to receive a score above 80. The study graded any country with an 80 or above as an A grade, and defined these systems as “first class and robust” systems that deliver good benefits, are sustainable, and have a “higher level of integrity.”
The US ranked 16th out of 37, and was a little above the overall average of 59.3 with a score of 60.6, which was slightly better than France’s 60.2, and tied with Malaysia. Rounding out the top five retirement systems after the Netherlands and Denmark were Australia, Finland, and Sweden, which scored 75.3, 73.6, and 72.3 respectively. The only other countries to score above a 70 were Norway (71.2), New Zealand (70.1), and Singapore (70.8).
In addition to ranking the world’s retirement systems, the study also found a “strong correlation” between the levels of pension assets and net household debt. Its analysis showed that growth in household debt in developed economies paired with the growth in assets held by pension funds. The study said growth in pension funds assets allows households to feel more financially secure in having future income from their nest egg, which leads them to borrow more to improve their living standards.
“As the wealth of an individual grows, whether it be in home ownership, investment portfolios or their retirement savings, so does their comfort with amassing debt,” said Knox. “The evidence suggests on a global basis, for every extra dollar a person has in pension assets, their net household debt rises by just under 50 cents.”