Norway was placed in the B category, “a system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system”.
The Netherlands and Denmark were the only countries out of 37 included in the final report that were awarded an A grade, with each receiving scores of over 80.
The index value is the product of three sub-indices: adequacy (benefits, system design, savings, tax support, home ownership and growth assets); sustainability (pension coverage, total assets, contributions, demography, government debt and economic growth) and integrity (regulation, governance, protection, communication and operating costs).
Norway received a B grade for adequacy, a C grade for sustainability and an A grade for integrity.
The analysis notes that the Norwegian index value fell slightly from 71.5 in 2018 to 71.2 in 2019. This was primarily due to changes in the sustainability sub-index.
For sustainability, although several indicators influence the index score, the level of coverage of private pension plans, projected demographic factors and the level of pension assets as a proportion of GDP are the most important, according to the report text.
Norway’s retirement income system comprises an earnings-related social security pension with a minimum pension level, and mandatory occupational pension plans. There are also many voluntary arrangements to provide additional benefits, the report notes.
The report suggested the Norwegian pensions system could be improved by:
- Raising the level of household saving and reducing the level of household debt
- Increasing the level of mandatory contributions into the defined contribution plans thereby raising the level of pension assets
- Introducing the option for voluntary contributions with tax relief for members of defined contribution plans
- Introducing arrangements to protect all the pension interests of both parties in a divorce
- Allocating a specific portion of the government-based fund for retirement purposes
Other countries in the B bracket were for example Canada, Chile and Germany, while countries such as the UK, US and France received a C+ grade and for example India, China and Japan received only a D grade.
You can read the Melbourne Mercer Global Pension Index report in full here. The index is a collaboration between the government, industry and academia in the Australian state of Victoria.