India’s retirement framework lags global standards, Mercer–CFA index finds

India’s retirement income system has once again found itself lagging far behind global peers. According to the Global Pension Index 2025, published by Mercer and the CFA Institute, India has been assigned a D-grade with a score of 43.8 out of 100, underscoring persistent challenges in providing adequate, sustainable, and trusted retirement income to its citizens.

The study benchmarks 52 global retirement systems, covering about 65% of the world’s population, and assesses each on three pillars — adequacy (40%), sustainability (35%), and integrity (25%). Top performers such as the Netherlands, Iceland, Denmark, Singapore, and Israel continue to dominate, while India, the Philippines, and Thailand remain at the lower end of the rankings.

India trails peers

India’s score of 43.8 places it at the bottom of the global list, below countries such as Argentina and Turkey, which also received a D-grade. The index describes India’s system as “underdeveloped,” citing low pension adequacy, weak sustainability, and limited formal coverage among workers.

India’s retirement income framework is composed of several elements:

An earnings-linked employee pension scheme under the Employees’ Pension Scheme (EPS).

A defined contribution (DC) provident fund through the Employees’ Provident Fund Organisation (EPFO).

Employer-managed pension schemes, largely DC in nature.

Government-backed initiatives targeting unorganised workers under the universal social security framework.

However, despite these multiple layers, coverage remains narrow. A large part of India’s workforce — nearly 85–90% in the informal sector — lacks access to formal retirement benefits. This makes pension adequacy one of the weakest components of India’s score.

Governance gaps

The report highlights that India’s sustainability score is low due to long-term fiscal stress and demographic challenges. As life expectancy rises and the working-age population stabilises, funding future pension obligations will require structural reform and broader participation.

India performs relatively better on the integrity pillar, which measures governance, regulation, and transparency, but still falls short of global standards. Limited disclosure, fragmented regulatory oversight, and restricted investment flexibility for pension funds remain major issues.

Lessons from others

In contrast, Singapore emerged as the world’s best pension system, scoring 86 out of 100. Built around the Central Provident Fund (CPF) — a compulsory, defined-contribution model — Singapore ensures universal coverage, prudent investments, and minimal reliance on government subsidies. The Netherlands and Iceland continue to follow closely behind, supported by well-funded, transparent, and sustainable systems that balance public and private participation.

Globally, retirement assets grew 10% in 2024, reaching nearly $63 trillion, driven by rising market returns and higher pension participation. But India’s modest institutional base and limited pension asset accumulation make it vulnerable to future funding pressures.

Scope of improvement

The Mercer–CFA report suggests that India’s pension system could strengthen its position by:

Introducing a minimum income guarantee for the poorest elderly citizens.

Expanding pension coverage to informal workers through simplified enrolment and incentives.

Setting a minimum access age to prevent early withdrawals and preserve funds for retirement.

Enhancing regulatory oversight and allowing greater investment diversification for pension funds.

The road ahead

India’s score has slipped marginally from 44.0 in 2024 to 43.8 in 2025, mainly due to new criteria added under the sustainability index. Analysts warn that without structural reform, India risks widening its pension gap just as its elderly population is set to double by 2050. In comparison, top-ranking systems like Singapore and the Netherlands demonstrate that adequate pensions need not come at the expense of sustainability — provided governance, trust, and long-term planning align.