India's retirement system has improved marginally from 2021 to rank at 41 out of the 44 countries examined, according to a report.

According to the survey, India had an overall index value of 44.4, up from 43.3 in 2021, ranking 41 out of the 44 retirement income systems analysed.

The improvement was primarily due to an increase in its net replacement rates, according to the 2022 Mercer CFA Institute Global Pension Index survey (MCGPI).

The MCGPI is a comprehensive study of 44 global pension systems, accounting for 65 per cent of the world's population.

It benchmarks retirement income systems around the world, highlighting some shortcomings in each system, and suggests possible areas of reform that would help provide more adequate and sustainable retirement benefits.

Globally, Iceland was ranked at the top followed by the Netherlands, Denmark, Israel, Finland and Australia.

Thailand ranked last at 44, while Philippines was at 43 and Argentina was at 42, according to MCGPI.

This year's MCGPI also features Portugal as a new addition ranking at 24.

According to the report, in the absence of social security coverage in India, the adequacy and sustainability sub-indices can be improved significantly by boosting coverage under private pension arrangements.

Regulations in India can also be strengthened to provide a greater level of security for private pension plans, which would enhance the system's integrity.

The penetration of private pension plans is low in India and with over 95 per cent of the total workforce being in the unorganised sector, there is a need for strong facilitation so that these workers are not left out of the pension system.

There is hope that new labour codes, when implemented, would give access to such coverage and drive the necessary improvement in the adequacy and sustainability sub-indices, it stated.

"The financial fragility of individuals has been exposed due to reasons such as the pandemic, global conflicts and volatile interest rates. The lack of a social system to support citizens has only accentuated the impact. Since the past decade or so, 2001-02, the government has adopted a number of measures aimed at pension reforms for both the central government and for the unorganised sector," Mercer India Business Leader - Health and Wealth - Preeti Chandrashekhar said.

Subscribers under the National Pension System are also increasing. However, with traditional employer-employee relationships getting blurred, there is a need for programmes that are inclusive of all Indian workers including those in the gig economy, she said.

"The new labour reforms are expected to usher in a framework to facilitate increased participation in private pensions, thereby encouraging higher levels of private savings. Given the demographic diversity and the large percentage of the workforce in the unorganised sector, reforms in the pension system take time to manifest themselves. The results from this year's Mercer CFA Institute Global Pension Index show that India's pension system is getting stronger, but work still needs to be done," she added.