Denmark has retained its dominant position as leader of the Melbourne Mercer Global Pensions Indexdespite seeing its integrity and adequacy ratings decline in the latest edition.
The ranking, published for the fifth time by the Australian Centre for Financial Studies, also revised downward its overall rating for the Netherlands – although the country remained second, ahead of Australia.
Other European countries – such Switzerland and, notably, the UK – saw their scores increase.
Explaining the changed scores, the index noted that it had introduced several new questions in its integrity sub index, accounting for 40% of a country’s total score.
A question on whether private funds were required to prepare a policy paper on potential conflicts of interest was cited as one of the reasons the Netherlands saw its score fall by more than 3 points in the integrity sub-index and 0.6 points overall.
Additionally, amended queries about taxation saw several countries’ system adequacy downgraded after questions on tax incentives for contributions were broadened to ask about when members were forced to contribute tax.
The index noted that the question was now revised to ask whether the plan’s investment earnings were taxed during the pre-retirement and/or post-retirement period.
Of Denmark’s falling rating, it added: “The Danish index value fell from 82.9 in 2012 to 80.2 in 2013 primarily due to the revised tax question, which recognised that investment income in a pension plan is taxed, and a revised score to a question in the integrity sub-index.”
The country saw its adequacy rating fall by nearly 3 points to 75.2, going against the grain in a year that saw the average adequacy rating rise 1.3 points.
Additionally, the Danish integrity rating fell by more than 6 points, at 80 points now behind Australia, the Netherlands, the UK, Switzerland and Sweden – a decline put down to a new question on conflict of interest policies.
Although the 2013 edition saw Mexico and Indonesia added to the ranking, neither country came ahead of the eight European countries assessed.
France, similarly affected by the revised tax question that hurt Denmark’s score, ranked 13 out of 20 and drew the lowest overall rating at 53.5 – more than 4 points lower than 12th-ranked Poland.
Germany saw its fortunes improve over the 2012 index, rising to 58.5 points as its adequacy rating rose to nearly 70, remaining ahead of Poland in the category and overtaking Sweden as the country’s net replacement rate declined, causing its adequacy rating to fall to nearly 65.
European countries retained six of the 10 leading spots in the ranking, with Germany leapfrogging Poland and the US.
The UK saw itself displaced by Singapore and Chile, ranking 9th, ahead of Germany, and Sweden and Switzerland swapped last year’s 4th and 5th places due to increased household savings rates in the landlocked nation.