The 2024 Global Pension Index by Mercer considers the German pension system to have marginally improved since last year’s analysis, ranking 20th place out of systems in 48 countries.

Mercer’s Global Pension Index 2024

Human resources firm Mercer and the Chartered Financial Analyst (CFA) Institute annually rank 48 national pension systems based on what they offer retirees, whether they are financially viable for the future and how reliable they are at ensuring benefits. These factors are combined into the following three categories:

• Adequacy (benefits, system design, savings, tax support, home ownership and growth assets)
• Sustainability (pension coverage, total assets, contributions, demography, government debt and economic growth)
• Integrity (regulation, governance, protection, communication and operating costs)

Scores in each of the categories contribute to the country’s final aggregate score, although each is weighted differently - adequacy is worth 40 percent of the final score, sustainability 35 percent and integrity 25 percent. Based on the aggregate score out of 100, each country is assigned a grade from A to E, with A only awarded to countries with scores of 80 points or higher.

For 2024, Mercer wrote that retirees are coming under increasing pressure thanks to inflation and rising interest rates, which heavily impact the elderly on pensions which are not indexed to rising costs. At the same time, many European countries face an ageing population which could throw the financial viability of programmes into doubt.

The Netherlands’ pension system tops Mercer ranking

With a score of 84,8, Mercer named the Netherlands as having the best national pension system in 2024. The Dutch were joined by Iceland, Denmark and Israel in the top four, and as the only countries given an A rating by the ranking.

Mercer wrote that despite undertaking “significant pension reform…the [Dutch pension system] will continue to provide very good benefits, supported by a strong asset base and very sound regulation.” However, they noted that the Dutch score could be improved by reducing levels of household debt and providing more benefits for those caring for children. 

By contrast, India was rated as having the worst pension system of the 48 analysed. Though progress has been made, the study called on the Indian government to expand social security programmes to provide coverage to more people earlier, especially low earners.

German pension system considered average

Germany’s pension system was awarded an average rank, coming in 20th place out of the 48 countries considered. Mercer noted that Germany’s ranking had improved slightly from 66,8 in 2024 to 67,3 in 2024, but dropped from 19th place to 20th.

Increasing the minimum pension for low-income pensioners, increasing funded contributions in private pensions and increasing coverage for employees with occupational pension plans were named as the three areas where Germany could direct attention to increasing its overall index value.

With Germany’s population ageing and workforce shrinking, the country desperately needs to find a new way to fund its pension system. Currently, working-age people in Germany pay the pension funds of people who are retired, rather than retired people receiving the money they paid into their fund during their working lives. 

In 1992, 2,7 people working people funded the pension payments of one retired person, but thanks to demographic changes, this burden now falls on 1,8 people, according to 2020 figures. By 2030, just 1,5 people will be responsible for paying the pension of one retiree.

The German government hopes that new immigration laws and the Opportunity Card (Chancenkarte) visa will encourage skilled workers from third countries to come and work in the federal republic, which should ease the worker shortage and balance an ageing population.

In March 2024, the coalition government announced that it would buy stocks from international capital markets to finance the pension system long-term, easing the cost of pension contributions for individuals and taking pressure off the government budget. According to the plan, the government hopes to build up at least 200 billion euros of stocks by the mid-2030s.

Best pension systems in the world revealed

In all, here are the 10 countries with the best pension systems in the world:

1. The Netherlands (84,8)
2. Iceland (83,4)
3. Denmark (81,6)
4. Israel (80,2)
5. Singapore (78,7)
6. Australia (76,7)
7. Finland (75,9)
8. Norway (75,2)
9. Chile (74,9)
10. Sweden (74,3)

For more information, and to see how other countries ranked, check out the Mercer website.

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