The 2014 Melbourne Mercer Global Pension Index saw Australia jump from third place to second globally, leapfrogging the Netherlands for the first time in five years.
The rise to second place was largely down to a "significant improvement" in the adequacy of the Australian system as a result of the increase in the superannuation guarantee from nine per cent to 12 per cent, said Mercer.
Australia’s overall score, taking into account more than 50 indicators under the sub-indices of adequacy, sustainability and integrity, increased to 79.9 in 2014 from 77.8 in 2013.
However, Denmark continues to hold the top spot.
"Denmark’s well-funded pension system with its good coverage, high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations are the primary reasons for its top spot," said Mercer.
The Mercer report suggested a number of changes to improve Australia's superannuation system, including:
- increasing the labour force participation rate at older ages;
- introducing a mechanism to increase the pension age as life expectancy continues to increase;
- increasing the minimum access age to receive benefits from private pension plans so access to retirement benefits is restricted to no more than five years before age pension eligibility; and
- removing legislative barriers to encourage more effective retirement income products.
