New entrant Denmark is the star performer in this year’s Mercer Global Pension Index, with the Scandanvian nation’s pension system ranking first out of the 18 countries surveyed.

Australia increased its index score from 75 to 75.7 this year, but was ranked third behind Denmark (82.9) and the Netherlands (78.8). The average score of the 18 countries was 61.0.

The four-year-old index is compiled by Mercer in association with the Australian Centre for Financial Studies. Two countries are added annually and this year the index covers the pension systems of 18 countries. It examines the private and public components of a country’s retirement savings system as well as assets outside of pensions.

“We added two new countries this year and, while Denmark was A grade – and the first country to be ranked as A grade, the other country was South Korea, which scored a D,” Dr David Knox, Mercer senior partner and report author, said in a telephone interview.

“But in terms of Australia, the index shows that Australia’s system is a good one and is well respected internationally, and it can also expect to improve its position in coming years when the superannuation guarantee increases from 9 per cent to 12 per cent.”

Knox sounded a warning however, saying he was concerned with Australian funds’ weighting to growth assets.

The slight improvement in the Australian score came from an increase in superannuation assets under management and a rise in the work-participation rate among those aged between 55 and 64.