The 2022 Mercer Global Pension Index assesses pension systems in 44 countries, with the best rated countries being Iceland, Netherlands and Denmark and Argentina, the Philippines and Thailand the worst.

PAYGO pension systems have increasingly been complemented or replaced by individual savings schemes worldwide, especially in countries with the most highly rated pension systems. In Iceland, Netherlands and Denmark, the coverage of the occupational (individual savings) system is more than 80 per cent and pension funds exceed 200 per cent of GDP.

The results for Latin American countries show that pensions remain a major challenge in the region. Uruguay ranks 12th with 71.5 of a possible 100 points (index value), Chile 16th with 68.3 points, Colombia 21st with 63.2 points, Mexico 29th with 56.1 points, Peru 30th with 55.8 points, Brazil 31st with 55.8 points and Argentina 42nd with 43.3 points.

It is worth mentioning that the Mexican reform, which among other things gradually increases the contribution rate to the individual accounts system, is now showing results, since this country ranked nine places higher than in the previous edition. The implementation of the Universal Guaranteed Pension was not considered in the assessment of Chile’s ranking, so the country is expected to rank higher in following editions of the report.

The Mercer Report’s main recommendation for improvement to countries in the region is to encourage both mandatory and voluntary private savings. Nonetheless, some of the pension reforms being discussed in the region take no notice of it, and even go in the opposite direction. In Chile it has been proposed to allocate the new contribution to a PAYGO system with notional accounts (Notional defined contribution, NDC), while in Colombia the assignment of contributions from the individual savings system to the PAYGO system is being discussed. These proposals run counter to the global trend in pension systems and, due to demographic trends, pose a risk to their financial sustainability.

Read the full report here.