GLOBAL - The Netherlands has come out top in a new global index rating pension systems which assesses the adequacy, sustainability and integrity of regimes, closely followed by Australia and Sweden.
The Melbourne Mercer Global Pension Index compared the retirement income systems of 11 countries across five continents to create an index that Mercer claimed is the first time pension systems have been compared internationally in a way that takes the entire system into account.
The index considered results from more than 40 indicators reflecting features that are desirable in all retirement systems, and these indicators were then grouped into adequacy, sustainability and integrity.
Top ranking in the index went to the Netherlands with a score of 76.1 out of a maximum of 100, followed by Australia with 74.0, Sweden 73.5 and Canada with 73.2.
The UK system was ranked fifth but fell significantly below the four leaders, with an overall index value of 63.9.
John Betts, worldwide partner at Mercer, said while the UK system had some good features, major shortcomings needed to be addressed to make it sustainable. Improving the general level of retirement income was key action that could be taken, he said.
“Practically, this could only be done in conjunction with increasing the retirement age and encouraging greater retirement flexibility,” he said.
The report recommended that the UK system could be improved by raising the minimum pension for those on low incomes, adjusting the level of mandatory provision to raise the net replacement for median-income earners, by having more older workers in work, and by raising household saving levels.
The index considered results from more than 40 indicators reflecting features that are desirable in all retirement systems, and these indicators were then grouped into adequacy, sustainability and integrity.
Seen in terms of sustainability alone, Sweden’s system topped the rankings with a sub-index value of 75.2.
Of Europeans countries ranked, Germany took the lowest place, with an overall index value of 48.2, although its system outstripped the UK based on adequacy alone, scoring 60.8 in this sub-index compared with the UK’s 56.6.
None of the countries ranked was classed as having an A-grade system - with a score of more than 80. And this confirmed that no one system is perfect or robust enough right now to withstand the challenges presented by an ageing population, according to David Knox, worldwide partner at Mercer, who oversaw the study.
The best arrangements for any country depended on its own particular national context, he said.
“However, by examining common and desirable characteristics of a retirement income system, lessons can be learned by governments to help them better prepare for demographic change and ensure older citizens have access to adequate incomes in retirement,” said Knox.
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