Danish pension system rated the world’s best

Denmark overtook the Netherlands and became the first country in the world to receive an ‘A’ rating thanks to its long-term political decisions

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Oct 17, 2012

Denmark has the best pension system in the world, according to a new analysis released by the global pension rater, Melbourne Mercer Global Pension Index.

The nation’s pension scheme was awarded an overall index value score of 82.9, leapfrogging the Dutch at 78.9, and thus became the first system ever to be classified as an ‘A-grade' system.

Denmark was awarded this first-rate ranking thanks to a well funded pension system, its asset and contribution quality levels, benefit provisions and a private pension system featuring well-developed regulations.

The annual analysis looked at the pension systems of 18 countries. The Netherlands, Australia, Sweden and Switzerland followed behind Denmark in the top five.

This year marks the first time Denmark was part of the index, which began in 2009, and according to Finn Rasmussen, the administrative director for Mercer in Denmark, the top placing is largely the result of some competent decisions in the political arena.

“Politically, there has been a disposition to save up in the correct, long-term manner. Now they have removed tax deductions on capital pensions and set a ceiling of 50,000 kroner for payments for retirement benefit instalments,” Rasmussen told Berlingske newspaper. “It’s in the interest of society that we’re all secured a lifelong pension and that you can’t have all your pension funds paid out when you’re 60. That’s why annuity is the correct socio-economic path forward.”

And the best way for Denmark to maintain its position at the zenith of global pension systems is by not trying to fix a system that isn't broken, said Per Bremer Rasmussen, the managing director of the insurance and pension industry trade organisation Forsikring & Pension (F&P).

“We battled hard for many years to get this pension system established and the system hinges on wage earners buying into the idea of saving up for a pension through monthly instalments that can’t be touched for 20-30 years,” Rasmussen told Berlingske . “That’s why it becomes problematic when changing governments play with the system and alter the conditions. It’s dangerous and the best thing a politician can do is to keep away because then everything would be just fine.”

The good news comes in the wake of a dire prediction a month ago that suggested the rising pension age was contributing to a widening gap between the rich and poor in Denmark that could lead to the end of the welfare system.