Friday, January 14, 2022

Pension Rankings 2020

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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