India dropped from the 41st position out of 44 countries in the 2022 Global Pension Index to the 45th spot out of 47 countries in 2023.

The index was released by the United States-based consulting company Mercer and not-for-profit organisation CFA Institute on Tuesday. It comprises three sub-indices – adequacy, sustainability and integrity – to measure retirement income systems in 47 countries across over 50 indicators.

The first sub-index shows the adequacy of the benefits being provided and the sustainability sub-index represents the likelihood that the current pension system would be able to provide benefits in the future. The integrity sub-index includes legislative requirements that influence the overall governance and operations of the pension system, and shows the level of confidence of citizens in it.

India’s score improved marginally from 44.4 last year to 45.9 now. The report primarily attributed this to an improvement in the adequacy sub-index.

“India’s retirement income system comprises an earnings-related employee pension scheme, a DC [defined contribution] employee provident fund [EPFO] and supplementary employer-managed pension schemes that are largely DC in nature,” the report noted. “Government schemes have been launched as part of the universal social security program aimed at benefiting the unorganised sector.”

India can perform better by improving minimum support, expanding coverage of pension arrangements to workers in the unorganised sector and enhancing regulatory requirements for the private pension system, the report said.

The Netherlands, topping the ranking with a score of 85, was followed by Iceland at 83.5 and Denmark at 81.3.

In 2021, the Union government told Parliament that the Global Pension Index that had ranked India’s pension system low that year too, was “not based on reliable comparable international data”. India’s pension system was ranked 40th among 43 countries that year.

The Ministry of Labour and Employment had also said that the report did not recognise “every aspects of pension system prevailing in a country”.