The U.S. ranked ninth out of 18 countries for global pension systems this year, compared to its tenth place ranking the year prior.
According to the 1012 Melbourne Mercer Global Pension Index, the U.S. system requires further reform to withstand the pressures of its aging population and help Americans secure sufficient retirement savings. The report has compared national private and public pension systems of major world economies since 2009.
According to the index, many of the world’s retirement systems are under significant stress and even the world’s most advanced retirement income systems require reform. The rankings are based on the adequacy of the retirement income system to replace pre-retirement income, the sustainability of that system and the integrity of that system.
The U.S. could improve its ranking by raising the minimum pension for low-income retirees; adjusting the level of mandatory contributions to defined contribution plans or social security to increase the value of pension payments and bring them closer to replacing pre-retirement income; improving the vesting of benefits for all members and maintaining the real value of benefits through to retirement; reducing pre-retirement leakage by limiting the access to DC funds before retirement; and introducing a requirement that part of the retirement benefit must be taken as an income stream rather than a lump sum payment, according to the index.
“Too few Americans are accumulating sufficient assets in their defined contribution 401(k) plans,” said Arthur Noonan, senior consultant in Mercer’s Retirement, Risk and Finance Group. “Not only are the savings levels inadequate to provide for a sustainable retirement income, but regulations allow participants to borrow against their 401(k) assets, make withdrawals albeit with penalties, or take a lump sum upon retirement which can easily be spent leaving them nothing for their later years.”
Denmark received the top rating in this year’s evaluation and becomes the first system to be classified as “A” grade. The other countries among the top five are The Netherlands, Australia, Sweden and Switzerland. Canada was ranked sixth.
Mercer is a global consulting leader in talent, health, retirement and investments.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.