Belinda Sullivan, Head Corporate Consulting Strategy at Alexforbes
The 17th annual Mercer CFA Institute Global Pension Index (MCGPI), which benchmarks 52 retirement income systems worldwide, has been released. The Index is a collaborative effort between Mercer, the CFA Institute and the Monash Centre for Financial Studies, with Alexforbes providing critical input for the Southern African region.
The MCGPI is the world’s leading independent comparison of pension systems, evaluating each country across three core dimensions highlighting strengths and areas for reform to improve retirement outcomes:
- Adequacy: Measures benefits provided, system design, savings, government support and coverage to ensure retirees have sufficient income for a dignified retirement.
- Sustainability: Assesses the system’s ability to deliver promised benefits over the long term, considering factors like total assets, demographic trends, public expenditure and economic growth.
- Integrity: Examines the governance, regulation, protection, communication and operating costs to ensure trust and reliability in the system.
This year’s Index also explores how government interventions can have unintended consequences and proposes eight principles to guide governments in balancing the interests of private pension plan participants with broader national priorities.
Government mandates versus collaboration
Amid rising global uncertainty, the growth and scale of pension fund assets are increasingly prompting governments to look for ways to channel some of this capital into national priorities. Governments have long played a role in shaping how private pension funds invest, whether by imposing guidelines to protect retirees or by encouraging the pension sector to support domestic economic goals.
Countries including the United Kingdom, Canada, Australia and Malaysia have recently encouraged pension funds to invest in domestic infrastructure and innovation. Meanwhile, in other markets, debates continue over whether pension funds should be compelled to consider environmental, social and governance (ESG) factors rather than focusing solely on financial performance.
The Index underscores that the primary objective of pensions should remain securing retirement income, with fiduciary duty as the foremost priority. Pension systems are most effective when they balance innovation, national development goals and their core responsibility to investors.
South Africa’s 2025 results and year-on-year change
South Africa’s retirement income system received an overall grade of C, with a score of 51.0 (up from 49.6 in 2024). The sub-index scores are as follows:
- Adequacy: 38.0
- Sustainability: 48.2
- Integrity: 75.7
The overall improvement can primarily be attributed to the introduction of the two-pot retirement system, which enhances preservation and harmonises the treatment of retirement benefits. South Africa’s system continues to be recognised for its strong integrity, although adequacy and sustainability remain areas for further development.
The two-pot retirement system: A step forward for long-term outcomes
Effective 1 September 2024, South Africa implemented the two-pot retirement system. Under this framework:
- One-third of net contributions is allocated to an accessible savings component, allowing members to make annual withdrawals while employed.
- Two-thirds are designated to a retirement component, which must be preserved until retirement, when members are required to purchase a monthly pension.
This approach balances immediate financial needs with long-term savings goals. The compulsory preservation of the retirement component is expected to improve long-term outcomes for members, by restricting pre-retirement access, while still providing limited access through the savings pot. This reform represents a significant step towards improving retirement security for South Africans.
Global context and South Africa’s position
The retirement income systems of the Netherlands, Iceland, Denmark and Israel retained their A grade in 2025. For the first time, Singapore also received an A grade, becoming the first Asian country to do so. These systems are recognised for their robust, sustainable and well-governed structures.
South Africa’s C grade places it in the middle of the global rankings, with integrity as a relative strength and adequacy and sustainability as ongoing challenges.
Looking ahead
The 2025 MCGPI highlights the importance of continued reform and collaboration among government, industry and other stakeholders. The introduction of the two-pot retirement system is a positive development, but further efforts are required to strengthen adequacy and sustainability for all South Africans.
Find the 2025 Index on EBnet’s Publications Podium here.
ENDS
