Canada has held on to its fifth place ranking in a global comparison of pension systems, but significant reform is still needed.
According to the 2011 Melbourne Mercer Global Pension Index, many of the world’s retirement systems are under significant stress and even the most advanced pension systems—including Canada’s—require ongoing reform to ensure they’re robust enough to support a rapidly aging population.
The Canadian index value fell slightly from 69.9 in 2010 to 69.1 in 2011 due to a small decline in each of the adequacy, sustainability and integrity sub-indices, but generally demonstrated no significant change from previous years.
Netherlands held its position as number one on the index. Australia regained its ranking as second in the world, with Switzerland in third and Sweden in fourth.
However, there is no perfect retirement income system, according to the index. No country received an A grade, and 10 countries received either a C (major risks or shortcomings) or a D (major weaknesses and omissions).
“The best pension systems adopt a multi-pillar approach to spread these long term risks between governments, employers and individuals,” said Dr. David Knox, senior partner with Mercer and the author of the report. “Such an approach is also particularly relevant in periods of economic uncertainty, as we are now facing.”
“With CPP/QPP, OAS, GIS, employer pension plans and individual RRSPs, Canada has an excellent multi-pillar framework in place for retirement savings” said Scott Clausen, a partner in Mercer’s retirement risk and finance business in Toronto. “However, Canada’s retirement system can still be improved. We encourage public policy makers to focus their efforts on increasing pension coverage for middle income employees in the private sector as retirement savings for this group continues to fall.”
The overall index value for the Canadian system could be increased by:
- Increasing the coverage of employees in occupational pension schemes, possibly through a more efficient system;
- Introducing a mechanism to increase the government pension age of 65 as life expectancy continues to increase; and
- Increasing the level of household savings.
The index is in its third year and measures the retirement systems of 16 countries. It looks at both the publicly funded and private funded components of each retirement system as well as personal assets and savings outside the pension system. It is based on more than 40 indicators grouped into three sub-indices: adequacy, sustainability and integrity.
The measured countries ranked as follows: Netherlands, Australia, Switzerland, Sweden, Canada, U.K., Chile, Poland, Brazil, U.S., Singapore, France, Germany, Japan, India and China.