My daughter lives in Australia and my wife has family in the USA so I thought after reading the report on how pension funds are doing I would share what the three countries are doing in this area.
Canada’s Pension ranked 9th out of 39 pension systems studied by the Mercer CFA institute Global Pension Index 2020
Canada's retirement income system comprises a universal
flat-rate pension, supported by a means-tested in-income supplement; an earnings-related
pension based on revalued lifetime earnings; voluntary occupational pension
schemes (many of which are defined benefit schemes): and voluntary individual
retirement savings plans.
The overall index value for the Canadian system could be
increased by:
·
Increasing the coverage of employees in
occupational pension schemes through the development of an attractive product
for those without an employer-sponsored scheme
·
Increasing the level of household savings and
reducing the level of household debt
·
reducing government debt as a percentage of GDP
·
Increasing the labour force participation rate
at older ages as life expectancies rise
The
Canadian index value increased slightly from 69.2 in 2019 to 69.3 in 2020 due
to several improvements in the sustainability sub-index which were largely
offset by the decrease in the adequacy sub-index with reductions in the net
replacement rates published by the OECD
Australia
is ranked 4th out of 39 pension systems studied by the Mercer CFA institute
Global Pension Index 2020
Australia's
retirement income system comprises a means-tested age pension (paid from
general government revenue); a mandatory employer contribution paid into private-sector arrangements (mainly DC plans); and additional voluntary contributions
from employers, employees or the self-employed paid into private-sector plans.
The overall index value for the Australian system could be
increased by:
·
Moderating the assets test on the means-tested
age pension to
·
increase the net replacement rate for average
income earners
·
Raising the level of household saving and
reducing the level of household debt
·
Introducing a requirement that part of the
retirement benefit must be taken as an income stream
·
Increasing the labour force participation rate
at older ages as life expectancies rise
·
Introducing a mechanism to increase the pension
age as life expectancy continues to increase
The Australian index value decreased from 75.3 in 2019 to 74.2 in 2020 primarily due to a reduction in the net replacement rates published by the OECD.
The
United States is ranked 18th out of 29 pension systems studied by
the Mercer CFA institute Global Pension Index 2020
The
United States’ retirement income system comprises a social security system with
a progressive benefit formula based on lifetime earnings, adjusted to a current
dollar basis, together with a means-tested top-up benefit; and voluntary private
pensions, which may be occupational or personal.
The
overall index value for the American system could be increased by:
·
Raising the minimum pension for low-income pensioners
·
Improving the vesting of benefits for all plan
members and maintaining the real value of retained benefits through to retirement
·
Reducing pre-retirement leakage by further
limiting the access to funds before retirement
·
Introducing a requirement that part of the
retirement benefit must be taken as an income stream
·
Increasing the funding level of the social
security program
·
' Expanding coverage by providing access to
retirement plans on an institutional group basis for workers who don't have
access to an employer-sponsored plan
The
American index value decreased slightly from 60.6 in 2019 to 60.3 in 2020 due
to several small reductions in the sustainability subindex.
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