Other BriefingsSaudi Arabia’s Pension Reforms Boost Mercer Global Pension Index Ranking
The Global Pension Index score for Saudi Arabia improved to 60.5 in 2024, up from 59.5 the previous year, according to the latest Mercer CFA Institute Global Pension Index.
This improvement reflects the Kingdom’s ongoing pension reforms, resulting in an upgrade of its pension system rating to C+ from C. This rating places Saudi Arabia alongside countries like the United States, the UAE, and Spain. The C+ grade indicates a system with beneficial features, but one that still carries notable risks requiring attention.
One of the key reforms contributing to the higher rating is the Kingdom’s decision to raise the retirement age from 60 to 65 for both public and private sector employees. This reform, implemented in July 2024, is part of the country’s Vision 2030 initiative, which aims to enhance the sustainability of the pension system and improve living conditions for retirees. Additionally, the contribution period for early retirement was increased from 25 to 30 years to promote longer workforce participation, easing financial pressure on the pension system.
Saudi Arabia maintained its position at 28th out of 48 global pension systems in the index. Notably, its sustainability score rose from 54.9 to 58, attributed to increased female workforce participation, updated demographic data, and clearer retirement policies. While the Kingdom ranks 20th in sustainability, it lags in adequacy and integrity, positioned at 32nd and 42nd respectively. Mercer emphasized that enhancing support for low-income retirees and increasing labor participation among older workers could help improve these scores.
The Mercer Global Pension Index evaluates systems across three key sub-indices: adequacy, sustainability, and integrity. Adequacy examines factors such as system design, government support, and home ownership, while sustainability considers elements like pension coverage, government debt, and economic growth. Integrity assesses governance, regulation, and operational transparency.
In July, the World Bank in a report praised Saudi Arabia’s pension reforms as a pioneering move for the Middle East and North Africa. The report stressed the importance of diversifying pension funds, implementing adjustment mechanisms, and expanding private savings options to build a robust system. The World Bank noted that these reforms balance fiscal sustainability with social equity, setting an example for other nations to follow.
Globally, the trend is shifting from defined benefit (DB) pension plans to defined contribution (DC) arrangements, which pose new financial planning challenges. With life expectancies rising, the flexibility of DC programs will be critical, but governments, policymakers, and employers must collaborate to ensure retirees can maintain their living standards.
As pension systems evolve, governments face increasing pressure from longer life spans, rising interest rates, and healthcare costs, leading to slightly lower scores for some countries this year. Overall, the Netherlands retained the top position in the global index with a score of 84.8, followed by Iceland and Denmark, with Israel and Singapore rounding out the top five.
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