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

Abdul Hadi (), Emese Bruder and Widhayani Puri Setioningtyas
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Abdul Hadi: Doctoral School of Economic and Regional Sciences, Hungarian University of Agriculture and Life Sciences, 2100 Gödöllo, Hungary
Emese Bruder: Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, 2100 Gödöllo, Hungary
Widhayani Puri Setioningtyas: Doctoral School of Economic and Regional Sciences, Hungarian University of Agriculture and Life Sciences, 2100 Gödöllo, Hungary

Social Sciences, 2022, vol. 11, issue 10, 1-17

Abstract: 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.

Keywords: pension system; pension reform; Indonesia; Iceland; The Netherlands (search for similar items in EconPapers)
JEL-codes: A B N P Y80 Z00 (search for similar items in EconPapers)
Date: 2022
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