India has taken several steps to strengthen its pension system in recent years, but the latest Mercer CFA Institute Global Pension Index 2025 report shows that there is still a long way to go.
This year, India ranked last out of 104 countries in the Global Pension Index. India’s overall score was 43.8 — showing that the country’s pension system is still in its infancy compared to developed countries.
Where does India stand compared to the top countries?
According to the report, the Netherlands, Iceland and Denmark ranked among the top three countries in the world this year. Based on their index score and ranking, these three countries, along with, Singapore and Israel have been place in Grade A.
Mercer CFA Institute Global Pension Index 2025 report has divided the countries into 5 grades – A to E based on the efficiency of their pension system.
The Netherlands (score 85.4) ranked first, providing people with stable income and security even after retirement.
Iceland (score 84) ranked second, with a system that offers a good balance between contributions, investment, and social security.
Denmark (score 82.3) secured the third position. Its pension system is extremely strong, both at the public and private levels.
These countries’ pension systems are successful due to high coverage, adequate funding, and strong governance. However, in countries like India, pension coverage remains very limited — especially for those working in the unorganised sector.
India’s comparison with Asian countries: Singapore, China, Japan, South Korea and Indonesia
India lags behind even many of Asian countries like Singapore, China, Japan, South Korea, Indonesia and Thailand.
In Asia, Singapore received the highest score of 80.8. Its Central Provident Fund (CPF) model provides people with not only pension but also housing and health security.
China performed better than even Japan with a score of 56.7. However, coverage in China, too, is limited in rural and unorganised sectors.
Japan scored 56.3. Its system is well-organised, but its rapidly growing elderly population is putting pressure on it.
Compared to India, these countries are distinguished by their establishment of mandatory savings schemes and robust social security mechanisms.
Where is India lagging?
India’s retirement income system comprises an earnings-related employee pension scheme, a DC (defined contribution) employee provident fund (EPF) and supplementary employer-managed pension schemes that are largely DC in nature. Government schemes have been launched as part of the universal social security program aimed at benefiting the unorganised sector.
The overall index value for the Indian system could potentially be increased by:
- Introducing a minimum level of support for the poorest aged individuals;
- Increasing coverage of pension arrangements for the unorganised working class, thereby increasing the level of assets over time;
- Introducing a minimum access age so that benefits are preserved for retirement purposes;
- Improving the regulatory requirements for the private pension system.
India’s index value fell from 44 in 2024 to 43.8 in 2025.
India has though made progress in establishing a robust framework through schemes like the Atal Pension Yojana (APY) and the National Pension System (NPS). However, a large population — especially rural and unorganised workers — remains excluded from these schemes.
India’s steps toward pension reforms
India’s pension system is still in its development stage. According to the Mercer report, India should focus on three key areas to improve its score —
Increasing coverage: Incorporating informal sector workers into the formal pension system.
Increasing financial literacy: Educating people about the importance of saving for retirement.
Sustainability: Ensuring long-term sustainability of pension fund investments.
