If you are considering retiring abroad, then the newly released global pension index by U.S. consulting firm Mercer is a good indication of where to focus your search if you’re looking for stability. According to the annual report, the Netherlands (with a score of 85.0), Iceland (84.8), and Denmark (81.3) are the countries with the top three pension systems out of the 47 countries that it studied. The report points out that the Netherlands has a flat-rate public pension and a non-mandatory earnings-based system.
Mercer rates each country in three categories: adequacy, which measures factors such as benefits, government assistance, and home ownership; sustainability, providing data on pension coverage, economic growth, and public expenditure; and integrity, which measures protection, regulation, and operating costs of the pension system.
As far as popular retirement destinations for American expats, such as Portugal, which attracts retirees with its affordable cost of living, the country scored 67.4 and was graded with a B but topped the adequacy category thanks to its earnings-related system and income safety net. Italy scored lower, 56.3, and has the lowest sustainability score out of any European country on the list.
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The U.S. has the same grade as France and Croatia, a C+, with a score of 63, which the report points out could be improved by raising the minimum pension and improving the vesting of the current benefits.
Finland, the happiest country in the world, has the sixth-best pension system and scores very high in the integrity category. Israel is the fourth top performer, with an excellent A grade.
The worst performers are India (45.9), The Philippines (45.2), and Argentina (42.3).
However, Eimear Walsh, Mercer’s head of investments and wealth, told CNBC that the index has limitations and doesn’t paint the full picture.
“We focus a lot on the pensions system but that’s not the only thing to consider. It’s an important balance,” said Walsh. “A lot of it also depends on the tax system, the climate and culture of the country, and whether people can actually be happy there,” she explained.
Earlier this year, another report by Natixis Investment Managers and CoreData Research, which incorporates more factors such as healthcare life expectancy and quality of life, rated Norway, Switzerland, and Iceland as providing the most retirement security for their residents out of the 44 nations it studied. The only non-European country in the top ten was Australia, which ranked seventh.