Kas Bank : The Netherlands has the best pension system in the world

The Global Pension Index examines the pension systems of 34 countries worldwide for adequacy, sustainability and integrity. The Netherlands scored 80.3 points and passed Denmark (80.2) with a 0.1-point difference. Both countries reached the A status this year. Finland completes the top three with 74.5 points.

The Netherlands scored highest and achieves A-status

According to Mercer, little has changed in the pension system itself. It is mainly the external factors, such as economic growth, that have led to higher scores. The Netherlands has had a solid, state-funded, basic pension system (AOW-system) for years. But it is above all the strong interdependence of the occupational pension scheme (the so-called 'second pillar') that made the Netherlands the number one position in this year's survey. The increase in the state old-age pension age, now increased to 66, also yielded points with regard to the financial sustainability of our pension system.

Our country can maintain its A status by reducing its debt and increasing the amount of savings per household. In addition, it is necessary to further improve the pension system by encouraging participation in employment at a higher age, in line with rising life expectancy.

Is the Dutch pension system future-proof?

With pension assets of EUR 1362 billion, we have a large pot of money for our 'retirement days'. But is our pension system really future-proof? Denmark achieved a score of 81.8 in the sustainability criteria and 79.2 in the Netherlands. According to Mercer, the Dutch pension system is complex and offers little freedom of choice. The government and the labour unions have been discussing pension reforms for years. This is also urgently needed in view of recent (economic) developments:

• the Dutch pension system is not sufficiently adapting to the changing labour market (including self-employed people),
• the pension system must deal with low interest rates,
• we are experiencing an increasing life expectancy,
• for years no indexation taken place despite economic growth.

As a result, the Dutch have little confidence in the pension system. To restore that trust, the necessary changes are required. It is therefore highly uncertain whether the Netherlands will also be at the top of this ranking in the coming years. Our pension system needs to be modernised. The appeal to maintain a solid and robust pension system is growing. It is necessary that progress will be made at the negotiating table between the labour unions and the government.