Israel Ranks Fifth Globally in Pension System Index, Achieving Top 'A' Grade

Israel's pension system has secured the fifth position globally in the 2026 Global Pension Index, a ranking compiled by consulting firm Marsh and the CFA Institute. The country is among only six nations to receive the highest 'A' rating, according to Ynet. The Netherlands retained the top spot for the fourth consecutive year with 85.8 out of 100 points, followed by Denmark (84.1), Iceland (84), and Singapore (82). Israel achieved a score of 81.9, an improvement from its previous score of 80.3.

The index evaluated the pension systems of 55 countries, representing 66% of the global population. An 'A' rating was awarded to systems scoring over 80 points, with the Netherlands, Denmark, Iceland, Singapore, Israel, and Australia all qualifying. These systems are recognized for providing good benefits, maintaining long-term sustainability, and demonstrating high governance quality. The report noted a continuing trend of half of the top-rated countries being located outside of Europe.

The ranking considers three key indicators: the adequacy of pension benefits (40% weight), system sustainability (35% weight), and governance (25% weight). Adequacy measures the guaranteed baseline income and the percentage of pre-retirement salary received by pensioners, calculated for individuals earning between 50% and 150% of the average wage. Sustainability assesses the system's future payment capacity, considering coverage, accumulated assets, contribution levels, demographics, government spending, public debt, and economic growth. Governance examines regulation, oversight, member protection, disclosure, and operational costs, with a focus on funded, particularly private, pension schemes.

Israel improved its scores in benefit adequacy, rising from 75.6 to 79.4, and governance, from 83.6 to 85.1. However, its sustainability score slightly decreased from 83.2 to 82.4.

The Netherlands' leading position is attributed to a combination of a robust state pension and widespread participation in private pension programs, with substantial assets invested to ensure future payouts. In contrast, some European systems, like those in Spain, face long-term vulnerabilities, particularly due to aging populations. Spain, for instance, scored high on adequacy but low on sustainability. Globally, demographic shifts, such as a declining working-age population in Japan and an increasing elderly population in Canada, are placing significant strain on pension systems, as highlighted by Christine Mahoney, head of international for Marsh's international employee benefits and investments division.

In response to these challenges, countries are implementing reforms. The Netherlands is transitioning to individual pension savings by 2028, while Germany's Bundesbank President Joachim Nagel proposed linking the retirement age to life expectancy from 2031. The UK's ranking has fallen to 14th place. The report recommends reducing household debt, mandating the conversion of savings into regular payouts, and expanding pension coverage, especially for the self-employed, to improve system performance.