Mercer CFA Institute Global Pension Index 2023 

• Index compares 47 retirement income systems, covering 64 per cent of the world’s population
• The Irish index value increased slightly from 70.0 in 2022 to 70.2 in 2023
• Ireland’s system ranked 10^th on the Integrity sub-index (81.1); 24^th on the Sustainability sub-index (54.4) and 14^th on the adequacy sub-index (77.1)
• Netherlands’s system was placed in the top spot

Dublin, October 17, 2023 — Mercer and CFA Institute have released the 15^th annual Mercer CFA Institute Global Pension Index (MCGPI).

Ireland’s retirement income system has been ranked in 13^th place, in the latest edition of the Mercer CFA Institute Global Pension Index (MCGPI).

The ranking is up from 14^th place in 2022 and the Irish system’s index value also increased slightly from 70.0 in 2022 to 70.2 this year. This is the third year in a row that the Irish system’s index value has improved and marked its highest value since it was first included in the index in 2014.

Overall, Ireland’s retirement income system ranked 10th on the Integrity sub-index this year (81.1); 24th on the Sustainability sub-index (54.4) and 14th on the Adequacy sub-index (77.1), achieving a B-Grade overall.

The Netherlands’ retirement income system has regained the top spot on the list, with Iceland and Denmark taking second and third places respectively. However, the Irish system scored ahead of some other European systems such as Belgium (68.6), Portugal (67.4), Germany (66.8) and France (61.7), but behind those in Finland (76.6), Norway (74.4), Sweden (74.0) and the UK (73.0). 

Ireland’s retirement income system comprises a flat-rate basic social security scheme and a means-tested benefit for those without sufficient social insurance contributions. Voluntary occupational pension schemes and personal pension schemes provide supplementary income in retirement.

The occupational pensions market in Ireland has experienced a period of rationalisation following the introduction of the IORP II regime. Increased governance requirements have resulted in many plans consolidating into master trusts, which will increase the governance, operational standards and regulatory supervision of these plans over time.

Commenting on Ireland’s performance in the latest index, Caitriona MacGuinness, DC and Private Wealth Leader for Mercer in Ireland, said: “Ireland’s retirement income system continues to rank highly in the CFA Global Pension Index. It ranks relatively low on sustainability (24^th), but strongly on integrity (10^th) and adequacy (14^th). The growing use of master trusts within the Irish market should result in a further increase in our integrity score in the future due to the professionally run nature of these schemes and additional associated regulatory oversight.”

Ms MacGuinness added that implementing government plans to introduce the promised automatic enrolment retirement savings regime would also improve Ireland’s overall index value. “The government has spoken for many years about introducing an automatic enrolment retirement savings regime in Ireland. It is currently preparing to launch this system next year and its introduction should increase the overall index value for Ireland’s pension system. This new regime should see an increase in the number of people saving for their retirement, and over time it should also improve the eventual adequacy of saving and reduce dependence on the State Pension”. 

Also expected in 2024 are government reforms to the State Pension, introducing new flexibility around drawdown and retirement age. 

“This should further contribute to the long-term sustainability of the overall pension system in Ireland,” Ms MacGuinness added.

Responding to the global results, Margaret Franklin, CFA, President and CEO, CFA Institute, said:

 “The average age of populations around the world continues to rise in many markets, mainly more mature markets. Inflation and rising interest rates have created a new market dynamic that poses significant challenges to pension plans. We also see continued fracturing as it relates to globalization. These are just a few of the increasingly complex challenges that pension funds face that impact retirees in significant ways.

“More and more often, individuals will have an increasingly important role to play as it relates to their own retirement. As investment professionals, we need to help them prepare for that. Each year, this index serves as a critical reminder that there is a long way to go in many jurisdictions to make pension plans function at their best and for the long-term financial security of beneficiaries.”

The growing impact of AI and its benefits to members

In addition to identifying the world’s top pension systems, the report examines the potential of artificial intelligence (AI) to improve pension and social security systems and provide people a better quality of life in retirement.

Dr. David Knox, Senior Partner at Mercer and lead author of the study said:

“The ongoing expansion of AI within the operations and decisions of investment managers could lead to more efficient and better-informed decision-making processes, which could potentially lead to higher real investment returns to pension plan members. AI also has the potential to improve member engagement and help individuals make long-term decisions about their financial decisions. Both advances should improve retirement outcomes.”

The report, however, makes clear that AI is not without risks, including modeling challenges and ethical concerns as well as the need for optimal data privacy and cybersecurity. In developing these systems, it is essential that AI models have strong governance and clear accountability to reduce biases and unjustified responses. Safeguards are critical for pension plans to retain their members’ long-term trust.

Dr Knox added: “AI by itself is not the complete answer. There will always be a need for human oversight. Despite these risks, AI has the opportunity to deliver a higher standard of living in retirement — a worthwhile objective for all pension systems.”

By the numbers

The Netherlands had the highest overall index value (85.0), closely followed by Iceland (84.8) and Denmark (81.3). Argentina had the lowest index value (42.3). Although the Netherlands is currently undertaking significant pension reform, the system is well-positioned to provide excellent benefits amid the move from a collective benefit structure to a more individual defined contribution approach.

The Index uses the weighted average of the sub-indices of adequacy, sustainability, and integrity. For each sub-index, the systems with the highest values were Portugal for adequacy (86.7), Iceland for sustainability (83.8), and Finland for integrity (90.9). The systems with the lowest values across the sub-indices were South Korea for adequacy (39.0), Austria for sustainability (22.6), and the Philippines for integrity (25.7).

Falling birth rates have placed pressure on several economies and pension systems over the longer term, negatively affecting the sustainability scores for countries like Italy and Spain. Several Asian systems, however, including mainland China, Korea, Singapore, and Japan, have undertaken reform to improve their scores in the last five years.

2023 Mercer CFA Institute Global Pension Index*

About the Mercer CFA Institute Global Pension Index (MCGPI)

The MCGPI benchmarks retirement income systems around the world, highlighting some shortcomings in each system, and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.

This year, the Global Pension Index compares 47 retirement income systems across the globe and covers 64 per cent of the world’s population. The 2023 Global Pension index includes three new retirement income systems – Botswana, Croatia, and Kazakhstan.

The Global Pension Index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against more than 50 indicators.

The Global Pension Index is a collaborative research project sponsored by CFA Institute, the global association of investment professionals, in collaboration with the Monash Centre for Financial Studies (MCFS), part of Monash Business School at Monash University, and Mercer, a global leader in redefining the world of work and reshaping retirement and investment outcomes.

For more information about the Mercer CFA Institute Global Pension Index, click here.

*Updated as of November 2023

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with more than 85,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.

About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are nearly 200,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has ten offices worldwide, and there are 160 local societies. For more information, visit www.cfainstitute.org or follow us on LinkedIn and Twitter at @CFAInstitute.

About the Monash Centre for Financial Studies (MCFS)

A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption.

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