11/10/2011
By Ilonka Oudenampsen
For the third year running the Dutch pension system was top of the list in the 2011 Melbourne Mercer Global Pension Index, followed by Australia, Switzerland, Sweden and Canada.
The global comparison of national pension systems looks at adequacy, sustainability and integrity and awards points for each of these categories. The Netherlands’ overall points ended up at 77.9, a slight drop from last year’s 78.3. With 75.0 points, Australia rose from fourth to second place, pushing both Switzerland with 72.7 points and Sweden with 72.6 one place down. Canada kept fifth place with 69.1 points.
These countries received a ‘B’ grade, together with the UK, which got a score of 66.0. A B is given to a pension system with a sound structure with many good features but room for improvement, while a ‘C’ is given to those systems with major risks or shortcomings and a ‘D’ grade to those with major weaknesses and omissions. This year ten pension systems received a ‘C’ grade, including Poland, France and Germany. An ‘A’ grade, for a perfect national retirement income system, was not given to any country.
The report said that many of the world’s retirement systems are under significant stress with even the world’s most advanced systems requiring ongoing reform to ensure they’re robust enough to support a rapidly ageing population.
Mercer senior partner and author of the report Dr David Knox said, “Given the current economic situation, the risk of governments not being able to financially support their ageing population is becoming more of a reality. Significant pension reform needs to be made now. The best pension systems adopt a multi-pillar approach to spread these long term risks between governments, employers and individuals.”
“Such an approach is also particularly relevant in periods of economic uncertainty such as we now face,” he added. “Each country has to consider its own social, economic, political, cultural and historical circumstances, but despite the differences in the history and development of each country’s system there are some common challenges around the world.”
The report pointed out that there are several areas where countries can improve their pension system, including increasing the state pension age and/or retirement age to reflect increasing life expectancy, and promoting higher labour force participation at older ages. Other recommendations were the encouragement of higher levels of private saving and possibly compelling employees to save for a pension or to auto-enrol them.
The index looked at pension systems in fifteen different countries: the Netherlands, Australia, Switzerland, Sweden, Canada, the UK, Chile, Poland, Brazil, the USA, Singapore, France, Germany, Japan, India and China. It is the first time Poland and India were added to the index.
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