An elderly man takes part in a rally to commemorate International Workers' Day, or Labour Day, in Luhansk, eastern Ukraine, May 1, 2014. REUTERS/Vasily Fedosenko
An elderly man takes part in a rally to commemorate International Workers' Day, or Labour Day, in Luhansk, eastern Ukraine, May 1, 2014. Reuters/Vasily Fedosenko

The Melbourne Mercer Global Pension Index has ranked Australia as the country with the second best retirement savings system in the world. The country has overtaken Netherlands because of an increase to Australian employees' compulsory superannuation payments and pension.

According to reports, Australia has scored 79.9 points out of 100 while Denmark garnered a score of 82.4 points. The Global Pension Index was based on a comparison of pension systems around the world and evaluating 25 countries using more than 50 indicators.

Mercer senior partner Dr David Knox said Australia has a strong retirement savings system in place to support people in retirement. The Australian government had added compulsory increases to employee's superannuation to reach the current level of 9.5 percent. Reports said compulsory payments are frozen at the current rate for seven years and is not expected to rise again until July 2021. The rate will rise by 0.5 percent every year from then on until it will reach 12 percent by 2025.

The Abbott government has previously announced that the 3.7 million Australian pensioners will be receiving their second increase for 2014. However, the Global Pension Index said there is still room for improvement in the country's retirement savings system to include an increase in labour force participation rate and the raising of pension age as life expectancy increases.

The report suggests a greater transparency from governments to improve the people's trust in retirement savings systems. Knox said it is important to gain trust to avoid losing the effectiveness of the superannuation system. He said governments, financial industries and regulators must practice good governance.

Australia has ranked 13th out of 96 countries in the Global AgeWatch Index prepared by the HelpAge International. The country has made it to the top 15 countries in the world for supporting the elderly population's quality of life. However, Australia was among the countries that scored low in preventing old age poverty with a rate of 35.5 percent in the region. Reports said the country had a below average score on welfare rates and pension coverage.