The Netherlands and Denmark have the best pension systems in the world, with Ireland trailing just outside the top 10 because its system may be too costly to sustain as the population ages, according to a global study that shines a light on countries’ preparations for ageing populations.
The two countries took the top slots in the Melbourne Mercer Global Pensions Index, both earning points for the level of financial security provided in retirement.
Australia came third, while the top 10 was rounded out with Finland, Sweden, Norway, Singapore, New Zealand, Canada, and Chile.
The survey of 37 countries, which covers almost two-thirds of the world’s population, uses 40 metrics to assess whether a system leads to improved financial outcomes for retirees, whether it is sustainable and if it has the trust and confidence of the community.
Ireland’s overall score was the same as that of Germany, with the systems in Britain, France, and Spain scoring lower.
Ireland’s pension system lost points because its relatively generous State pension was offset by the low numbers participating in saving for occupational pensions, which will likely push up the costs of the public system, as the profile of the population of working age changes.
“Ireland’s relatively high ranking masks an underlying imbalance. It’s clear that our comparatively generous State pension will come under increased strain as the population continues to age rapidly between now and 2050,” Caitriona MacGuinness at Mercer in Ireland said.
“The Government has committed to the introduction of an auto-enrolment system by 2022 which has the potential to significantly alleviate this strain.
"However, progress to date on rolling this out has been limited. Without auto-enrolment it is clear that future retirees will continue to depend on an increasingly unsustainable State pension,” she said.
Policymakers are faced with more people entering retirement, living longer, and needing a steady income flow.
Almost a fifth of the world’s population is forecast to be of retirement age by 2070, up from 9% this year, UN data shows.