Which Country Has the Best Pension? (And Why?)

Pension provision depends on where you live and what you do – but which country offers its citizens the best overall package?

(October 15, 2012) — A combination of adequate state provision and a good corporate pension system has made one Scandinavian nation the jewel in the retirement industry crown, says consulting firm Mercer.

Denmark, with a population of barely five and a half million, has taken the title as the best country on earth in which to be retired, according to a survey by Mercer.

Denmark scores very well in most of the adequacy indicators; has a very well-funded system with a high level of assets and strong contributions; and a private pension system with well-developed regulations,” the report said.

The country has taken the first ‘A’ grade, awarded by Mercer, showing it attained top marks in three main categories: adequacy, sustainability, and integrity.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

The state pension assets are managed by ATP, which made better investment returns than most asset managers last year due to an innovative system of risk-based investing. The country also has several large industry and sector pension funds, which are relatively well-funded.

In Mercer’s round-up, the Netherlands and Australia attained a ‘B+’ grade, with Canada, Switzerland, and Sweden following up with a ‘B’. The United Kingdom received a ‘C+’, while the United States, Germany, and several others were awarded just ‘C’ grades by the consultants.

Along with looking at the state of a nation’s pension system, the consultants focussed on the level of assets held in growth securities.

At the top of the chart, Australia holds between 71% and 80% in growth securities, the survey said, some 20 percentage points more than the closest countries, Canada, Switzerland, the UK, and US. All of these held between 51% and 60% in growth assets by the end of 2011.

Denmark, the leading nation, held up to only 20% in these assets, the survey said. This lowest level was only matched by China.

Mexico and the Czech Republic were showed as being the least keen on risk. Their national profiles showed them to hold more than 80% of portfolios in bonds and bills across all pension investment sectors. Israel followed closely, with just under 80% held in these assets.

To see how things compared to last year, click here.

«