Comparison of the World’s Best Pension Systems: The Lesson for Indonesia

• Published in: Social Sciences
• Main Authors: Abdul Hadi, Emese Bruder, Widhayani Puri Setioningtyas
• Format: Article in Journal/Newspaper
• Language: English
• Published: MDPI AG 2022
• Subjects: pension system; pension reform; Indonesia; Iceland; The Netherlands; scipo; eco; Mercer
• Online Access: https://doi.org/10.3390/socsci11100435; https://doaj.org/article/9e3407fecfd249aa8d05715a71e35872

Iceland and the Netherlands presently have the best pension systems in the world, according to the Mercer CFA Institute Global Pension Index 2021. In the meantime, Indonesia ranked 35th. This study compares and analyzes Iceland’s and the Netherlands’ current pension systems as the finest in the world, as well as the future threats to their pension systems, and applies the lessons learned from both nations to Indonesia, which intends to alter its public pension system. According to a comparative analysis of Iceland, the Netherlands, and Indonesia, the overall pension systems of Iceland and the Netherlands are advantageous for ensuring adequacy and sustainability of the pension system. However, Iceland and the Netherlands may suffer adequacy and sustainability issues in the long run. As a result, they should continue to evaluate their own countries’ present structures, notably in demographics. Concerning the Indonesia pension system, Indonesia policymakers should consider enforcing the social security system, since these systems have enabled Iceland and the Netherlands to have lower poverty rates. Furthermore, the Indonesian government should strengthen the existing PAYG and DB pension systems, raise the minimum pension eligibility age, contribute to the system regularly, and apply the cost-of-living adjustments to improve the adequacy and sustainability of the civil service pension system. Simultaneously, civil servants should contribute more to ensure the long-term viability of this pension system. The Indonesian government should implement such adjustments, as they would enhance budgetary sustainability in the long run.