Northern Europe scoops the pool for pension systems

David Knox

The Netherlands, Switzerland and Sweden were ranked the top three countries for their pension systems in the second annual study which rated adequacy, sustainability and integrity of both public and private pensions around the world.

The study, by consulting firm Mercer and the Australian Centre for Financial Services, an educational body, included 14 countries (11 last year), with Switzerland, Brazil and France added to the latest list.

Switzerland took Australia’s previous number-two spot, but the relative rating of Sweden as well pushed Australia into number four, ahead of Canada.

Australia has the fastest growing accumulation of pension assets in the world because of its compulsory 9 per cent of wages and salaries going into superannuation funds. This growth is expected to accelerate in the next few years because the recently re-elected Australian Labor Government has pledged to increase the compulsory saving to 12 per cent over time.

Mercer said Australia fell not only because of Switzerland’s inclusion but also because of new indicators relating to the cost of its retirement system. The report noted that the recent Australian Government review of its system also identified costs as an area which needed addressing.

The study is based on more than 40 indicators which reflect features that are desirable in retirement savings and income systems.

David Knox, a senior partner in Mercer’s Retirement, Risk and Finance practice, said the global financial crisis had threatened the sustainability of public and private pension systems in several countries through the decline in asset values and an increase in debt. Most acutely, this was reflected in Canada, the UK and US.

Overall rankings, with previous year in parentheses, were:

1.     Netherlands (1)

2.    Switzerland (-)

3.    Sweden (3)

4.    Australia (2)

5.    Canada (4)

6.    UK (5)

7.    Chile (7)

8.    Brazil (-)

9.    Singapore (8)

10.  USA (6)

11.    France (-)

12.   Germany (9)

13.  Japan (11)

14.  China (10)