Finnish pension system governance once again the most reliable – Finland ranks 9th overall
Finland was again rated as having the most reliable pension system governance in the international Marsh CA Institute Global Pension Index comparison. Although its total score improved slightly this year, Finland dropped one notch to 9th place. The other Nordic countries also scored well in the comparison.
The total Finnish index value increased due to an increase in the minimum pension as a proportion of the average wage.
“The net pension replacement rates at retirement as published by the OECD have also increased”, says Liaison Manager Mika Vidlund from the Finnish Centre for Pensions.
According to Vidlund, the index values for many other countries rose more than Finland’s, which is why Finland now ranks 9th in the Marsh comparison.
Top 10 pension systems table as an accessible Excel file.
The Marsh comparison, formerly known as the Mercer comparison, benchmarks retirement income systems of various countries using adequacy, sustainability and integrity as sub-indices. Finland has long received the highest score in the integrity sub-index.
When evaluating the integrity of a pension system, Marsh considers factors such as its operational effectiveness, transparency, regulation, and the reasonableness of administrative costs.
“Digital services and cybersecurity are now given greater weight. For the first time, Marsh is assessing whether pension providers offer mobile services to insured members. This means that index values may change when the assessment criteria change, even if the pension system itself remains unchanged. Finland’s strengths include stringent governance and risk management requirements, as well as the protection of pension rights in cases of fraud or bankruptcy”, Vidlund says.
Nordic countries perform well despite global ageing
According to Marsh’s pension comparison, global ageing challenges pension systems around the world. Falling birth rates and longer lifespans reduce the proportion of working age people in the population. At the same time, people are spending longer in retirement. This places increasing pressure on pension system financing, as fewer workers will have to fund the pensions of a growing number of pensioners.
In Marsh’s comparison, the Nordic countries have responded well to the challenges posted by an ageing population. Denmark and Iceland rank among the highest in the comparison. Finland, Sweden and Norway also receive high index values for the sustainability of their pension systems.
Pension expenditure in the Nordic countries is projected to grow more slowly than the average over the coming decades, particularly in Finland, Sweden and Denmark.
“Pension reforms in the Nordic countries, partially or fully funded pension systems, and measures to support continued working at older ages help to mitigate the effects of demographic change”, Vidlund explains.
The Netherlands tops the ranking as pension reform boosts citizens’ trust
The Netherlands, which topped the pension ranking, benefits particularly from its strong occupational pension scheme, in which near-universal state pensions are combined with broad employer-based arrangements.
The strengths of the Dutch pension system are its high degree of funding, substantial pension assets and high pension coverage relative to employee’s earnings. In addition, the governance, regulation and risk management of the Dutch pension system are considered strong by international standards.
The Netherlands is currently undergoing pension reform. The pension scheme is transitioning from a collective defined benefit to a collective defined contribution scheme, where each employee has their own pension account.
“In addition to increasing transparency, the aim of the reform is to achieve a fairer intergenerational distribution of risks and returns. The connection between pension contributions and investment returns to one’s own pension is clarified, and the investment risks can be better allocated to different age groups. Recent Dutch surveys measuring trust in the pension scheme indicate that citizens’ trust in the pension scheme is improving”, Vidlund concludes.
55 countries included in the comparison
The Marsh CFA Institute Global Pension Index comparison is compiled by Marsh, an international consultancy firm, that benchmarks the retirement income systems of different countries with the help of more than 50 indicators.
This year, 55 countries participated in the comparison, The countries’ total scores are calculated using a weighted average. The weightings used are 40% for adequacy, 35% for sustainability and 25% for integrity.
Marsh’s pension comparison has been published since 2009.
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