Which country has the best pension system in the world?
If you answered Denmark, you’d be on point, according to the Melbourne Mercer Global Pension Index 2012.
What makes Denmark’s A-grade retirement income system stand head and shoulders above the crowd is that it has a “public basic pension scheme, a means-tested supplementary pension benefit, a fully funded defined contribution scheme and mandatory occupational schemes.” Moreover, Denmark scored high on the sub-index scores for adequacy (78.1), sustainability (86.0) and integrity (86.4), giving it an overall index value of 82.9.
Arguably, Canada’s “B” grade pales in comparison. Our system includes a “universal flat-rate pension, supported by a means-tested income supplement; an earnings-related pension based on re-valued lifetime earnings; voluntary occupational pension schemes (many of which are defined benefit schemes); and voluntary individual retirement savings plans.”
Canada’s index value sits at 69.2 (up ever so slightly from 69.1 last year). Analysts attribute the modest improvement to the increase in retirement age and increase in assets, which was offset by a continued reduction in pension plan coverage for private sector employees.
All is not lost, if you consider that Canada placed sixth overall; the survey covers 18 countries, more than half of the world’s population and represents a range of pension approaches.
Still, the report offers three recommendations to ensure adequate, long-term benefits are delivered sustainably. Canadians may want to maintain the real value of accrued pension benefits from resignation until retirement; increase the level of household savings; and increase the coverage of employees in occupational pension schemes, which can be achieved by developing an attractive product for those without an employer-sponsored scheme.
Canadian plan sponsors can dig deeper and aim higher. One thing they ought to do is buckle down on the purpose and process of how money is managed in their pension and benefits schemes, as Scot Blythe affirms in this year’s Top 40 Money Managers Report, “At Your Service.”
Then, with your finger on the pension pulse, find inspiration by reading this month’s Inspiration, where, beneath Elaine Noel-Bentley’s lighthearted homage to her avocation, is a powerful nudge for adequate benefits for all.
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