India’s pension system is ranked among the worst globally, consistently landing at the bottom of international comparisons due to poor adequacy, limited coverage, and lack of sustainability. These weaknesses have led to India being graded ‘D’ on the Mercer CFA Global Pension Index 2025, trailing far behind top performers such as the Netherlands, Singapore, and Denmark.
The Global Pension Index evaluates countries on parameters such as adequacy, sustainability, and integrity of their pension systems. India’s score of 43.8 out of 100 places it in the “D-grade” category, reflecting a system with major weaknesses. This score is substantially below those of developed nations like the Netherlands, Denmark, and Australia, which typically score above 80 out of 100, representing robust and sustainable pension frameworks.
“The research highlights significant diversity between systems around the world, with index scores ranging from 43.8 to 85.4. The Netherlands, Iceland, Denmark, Singapore, and Israel rank highest. These nations offer strong benefits, sound regulation, and solid asset bases. India ranks lowest,” said the report.
The Global Pension Index 2025, benchmarks 52 retirement income systems across the world, covering about 65 per cent of the world’s population. Using three pillars — adequacy (40 per cent weight), sustainability (35 per cent), and integrity (25 per cent) — the index provides a comparative view of how well countries’ pension systems are delivering.
Key Areas of Weakness
Adequacy: India struggles with providing sufficient retirement income to its elderly population, driven by low coverage of formal pension schemes and inadequate benefits for informal sector workers.
Sustainability: Challenges stem from a young demographic but insufficient funding mechanisms and long-term planning, making the system vulnerable as the population ages.
Integrity: Issues such as regulatory oversight and public trust are cited as areas needing improvement, affecting the confidence of participants in retirement products.
Comparisons with Other Countries
Compared to models in the Netherlands, Singapore, and Denmark—where systems offer comprehensive coverage, strong safety nets for the disadvantaged, sustainable funding, and high transparency—India’s fragmented approach and low asset base starkly reveal its shortcomings. Even neighboring countries like China and Indonesia outscore India, further underlining the scale of India’s pension challenge.
A-grade retirement income systems—such as those in the Singapore, Netherlands, Denmark, and Israel lead the Global Pension Index 2025 rankings due to their model combination of generous benefits, sustainable funding, and high integrity.
Features of Top Pension Systems:
Strong Benefits: These systems provide high replacement rates, ensuring that retirees maintain a good standard of living in retirement.
Sustainable Funding: They rely on robust funding mechanisms including mandatory contributions, diversified investment strategies, and regular reviews to adapt to demographic changes.
High Integrity: Comprehensive regulatory frameworks guarantee transparency, protect participant rights, and maintain public trust in the system.
These top performers present a benchmark for reform in lower-ranked systems, showing how effective policy and administration can secure retirement incomes for all citizens.
India’s Pension System Structure
India’s retirement income system consists of an earnings-related employee pension scheme, the defined contribution Employee Provident Fund Organisation (EPFO), supplementary employer-managed schemes, plus government efforts to extend coverage to the vast unorganised workforce. However, fragmentation and inefficiency mean few workers—especially in rural and informal sectors – receive robust pension support.
India’s system is cited among the “worst” performers, not because it lacks ambition, but because decades of underinvestment, governance opacity, limited formal coverage and constrained investment freedom have stunted its system’s maturity.
The index underlines that while no country was downgraded in 2025, several have improved, signifying the pressure on behind systems like India’s to catch up.
What this rank means to India?
India’s low ranking is not just about numbers. It highlights structural challenges in delivering meaningful retirement incomes for a large and growing elderly population. Some key takeaways:
1. Low coverage and limited pensions for many workers
A large share of India’s workforce is informal, without access to formal pension or retirement benefit schemes. This limits adequacy of income replacement for many.
2. Fiscal burden and sustainability risk
With public finances stretched and social security needs rising, sustaining pension outflows over decades becomes difficult. Without reforms, India may find itself under pressure to subsidise or scale back pension commitments.
3. Governance and transparency gaps
Index findings emphasise that strengths in integrity (disclosure, regulation, governance) are essential for confidence in pension systems. For India, improving trust and regulatory oversight is crucial to strengthen pensions.
4. Constraints on private pension fund investments
The report notes that many systems impose investment restrictions to protect members’ benefits. Indeed, India restricts direct real estate exposure for pension funds (zero per cent in many cases) as part of its regulatory architecture.
Global Context and India
Globally, retirement wealth is growing. Among OECD countries, retirement assets grew 10 per cent in 2024, reaching around $63.1 trillion, driven by equity markets and broader pension participation.
In the 2025 index, top performers continue to maintain strong scores. Singapore is one of the new additions to A-level systems, joining the elite ranks.
India’s comparative position: With a rating of 43.8 and grade D, it sits among several countries in the “D” category. This underscores the gap between aspiration and delivery in India’s pension infrastructure.
How can India Improve?
According to the Mercer–CFA Institute report, India’s overall index value could rise by:
Introduce a minimum income guarantee for the poorest elderly.
Expanding pension coverage to include the large unorganised workforce, informal and rural workers.
Build pension assets over time through mandatory contributions and improved regulation.
Strengthening regulatory oversight and governance for private pension systems
Enforce minimum access ages and strengthen checks on benefit usage.
India’s pension system urgently requires reform to extend coverage, boost benefits, and develop sustainable funding to avoid worsening hardship for future retirees.