3 Countries With the Best Retirement Systems, According To Experts

A country’s retirement system should be designed to create financial security for retired citizens by providing a guaranteed and reasonable amount of income for life. Unfortunately, not all countries meet that ideal — and some fall shorter than others.

To find the countries with the best retirement systems and how they qualify as such, GOBankingRates looked at data published by the 2023 Mercer CFA Institute Global Pension Index. The index compares 47 different retirement income systems across the globe in reference to adequacy, sustainability and integrity, and assigns them each a letter grade from A to E to reflect their score.

Taking that data into account, here are the three countries with the best retirement systems in descending order, and a review of the United States’ at the end.

• Grade: A
• Overall index value: 85.0
• Adequacy sub-index: 85.6
• Sustainability sub-index: 82.4
• Integrity sub-index: 87.7

Ranking analysis: The Netherlands took the top spot, even though the country is currently undertaking a significant pension reform. According to the report, “the reason for this rating is that, notwithstanding these changes, the system will continue to provide very good benefits, supported by a strong asset base and very sound regulation.”

Type of retirement system: The Netherlands’ retirement system is made up of a flat-rate public pension and a quasi-mandatory earnings-related occupational pension linked to industrial agreements.

How the system can improve: One factor that would increase the overall index for the country is decreasing the level of household debt. In addition, the county could increase labor force participation for older aged residents as life expectancy rises, and introduce a carer’s pension credit for those caring for young children.

• Grade: A
• Overall index value: 84.8
• Adequacy sub-index: 85.5
• Sustainability sub-index: 83.8
• Integrity sub-index: 85.0

Ranking analysis: Iceland takes the No. 2 spot with an overall index value of 84.8. It ranks No. 3 for adequacy and No. 1 for sustainability among the 47 retirement systems. However, its integrity sub-index ranks lower, in eighth place.

Type of retirement system: Iceland’s retirement system is comprised of a state pension with two components: mandatory occupational pension schemes that require both employer and employee contributions and voluntary contributions in government-approved pensions.

How the system can improve: One way Iceland’s retirement system could improve is by reducing the level of household debt as a percentage of the GDP.

• Grade: A
• Overall index value: 81.3
• Adequacy sub-index: 82.5
• Sustainability sub-index: 82.5
• Integrity sub-index: 77.8

Ranking analysis: Denmark placed No. 3 for overall index value. And although the country placed No. 3 for sustainability and No. 6 for adequacy, it placed No. 19 for integrity.

Type of retirement system: Denmark’s retirement system is multifaceted, consisting of a public basic pension plan, a means-tested supplementary pension benefit, a fully funded defined contribution plan and mandatory occupational plans.

How the system can improve: One way the overall index value for Denmark’s retirement system could be increased is for the country to require all pension plans to produce publicly available annual reports.

For context, here’s how the U.S. ranked among the 47 countries:

• Grade: C+
• Overall index value: 63.0
• Adequacy sub-index: 66.7
• Sustainability sub-index: 61.1
• Integrity sub-index: 59.5

Ranking analysis: The U.S. ranked 24th for adequacy, 16th for sustainability and 41st for integrity.

Type of retirement system: The retirement system in the U.S. includes three main pillars: Social Security, employer-sponsored pensions or retirement savings plans and individual savings.

How the system can improve: One way the U.S. can improve its retirement system is to further limit access to funds before retirement, which will help reduce pre-retirement leakage.

Gabrielle Olya contributed to the reporting for this article.