The U.K. has fallen out of the top 10 sustainable retirement systems, as Australia retains its crown in the ranking by Allianz.
The firm updated its most recent rankings from 2014. The Pensions Sustainability Index systematically examines parts of the retirement system of 54 countries. Allianz then evaluates pressure on governments to undertake and implement reforms, and determines a country ranking that reflects the long-term sustainability of each retirement system.
The U.K. sat in 10th place in the 2014 ranking, but slipped to 11th place in the most recent analysis. The country did not deteriorate in terms of its sustainability score of 7.2, but fell relative to other countries.
Australia remains on top, followed by Denmark, which improved four places vs. the 2014 ranking. Sweden, the Netherlands, Norway, New Zealand and Latvia also remained in the top 10. Estonia and Chile entered the top 10, taking eighth and tied for ninth place, respectively.
The U.S. tied for ninth with Chile, slipping one place vs. the 2014 ranking. “The slight deterioration of the demographic outlook in the U.S. has had a negative impact on the sustainability score, but the American old-age provisioning system remains highly sustainable due to low pension expenditures and a young population that is expected to age slowly in the coming decades,” said a report accompanying the ranking.
At the other end of the ranking were China and Thailand, which Allianz said had “fragmented and inefficient systems” and are under the most pressure to reform. “The population of both countries is expected to age quickly in coming decades, which is expected to weigh on public finances, especially as the retirement age (both legal and effective) is low,” said the accompanying report. Both countries lack a comprehensive retirement system, with only a small proportion of the population enrolled into a retirement plan. “The risk of retirees falling into poverty is elevated in both nations as the replacement rate is also low.”
The rankings are available on Allianz's website.