By Mercer & CFA Institute

Mercer and the CFA Institute released its 14th annual Mercer CFA Institute Global Pension Index (MCGPI). Iceland’s retirement income system has once again topped the list, with The Netherlands and Denmark retaining second and third places respectively in the rankings. As more employers have stepped away from defined benefit (DB) plans, the study also investigates the challenges and opportunities with the global shift towards defined contribution (DC) plans where individuals bear increased financial responsibility.

The MCGPI is a comprehensive study of 44 global pension systems, accounting for 65 percent of the world’s population. It benchmarks retirement income systems around the world, highlighting some shortcomings in each system, and suggests possible areas of reform that would help provide more adequate and sustainable retirement benefits.

Senior Partner at Mercer and lead author of the study, Dr. David Knox, highlighted the importance of strong retirement schemes in light of growing external uncertainty.

“Individuals have been assuming more responsibility for their retirement savings for some time; amidst high levels of inflation, rising interest rates and greater uncertainty about economic conditions, they are doing so in an increasingly complex and volatile environment. Despite differences in social, political, historical or economic influences across geographies, many of these challenges are universal. And while the necessary reforms may take time and careful consideration, policymakers must do all they can to ensure retirement schemes are supported, developed and well-regulated,” said Dr. Knox.

CFA Institute President and CEO, Marg Franklin, CFA, underscored the dynamic environment of the investment industry.

“Since the inception of the Mercer CFA Institute Global Pension Index, the investment management and pension industry at large have faced extraordinary challenges. New financial products and strategies will be required to deliver adequate returns for beneficiaries. This past year, we’ve gone from a ‘lower for longer’ interest-rate environment to significant rates of inflation, quadrupling of interest rates in some global markets and a rise in the cost of living for many, all of which have a significant impact on the fixed income of retirees,” said Ms. Franklin.

“At CFA Institute, we believe financial professionals can serve as a force for good in society to support individuals through this complex time. This report provides insights on how retirement plans need to adapt or are adapting to the changing environment, and also makes recommendations for a range of reforms that can be implemented to improve the long-term outcomes from our retirement income systems,” she added.

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