When it comes to global surveys, the United States can’t catch a break. We’ve known for some time that we can’t educate our kids. Apparently, our economic freedom has recently been downgraded, and now comes news that our retirement system ranks 10th worldwide.
Each country was given a score between zero and 100. The overall index value represents the weighted average of the three sub-indices–adequacy, sustainability and integrity.
As for the dismal appearance of the Unites States in the ranking’s bottom half, the authors suggest methods for improving the system, which include:
- Raising the minimum pension for low-income pensioners;
- Adjusting the level of mandatory contributions to increase the net replacement for median income earners;
- 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.
Click through to find what other countries are doing right.
No. 10: United States
A silver lining to our somewhat embarrassing showing is that, according to the report, our “index value” increased slightly from 57.3 in 2010 to 58.1in 2011 due to an increase in the “adequacy” sub-index. This was partly offset by a decline in the sustainability sub-index due to a fall in asset values and a rise in government debt.
No. 9: Brazil
According to the report, “Brazil’s retirement income system comprises a pay-as-you-go social security system with higher replacement rates for lower income earners; and voluntary occupational corporate and individual pension plans which may be offered by insurance companies or employers.”
No. 8: Poland
Tired xenophobic jokes aside, Poland is faring well compared with its Eastern European counterparts and other industrialized countries. As the authors note, Poland’s retirement income system was reformed in 1999.
“The new system, which applies to people born after 1968, comprises a minimum pension and an earnings-related system with notional accounts. The overall system is in transition from a pay-as-you-go system to a funded approach. There are also voluntary employer sponsored pension plans.”
No. 7: Chile
Chile’s retirement income system in best described with one word—Gooooaaallll! The survey says it includes “means-tested social assistance; a mandatory privately managed defined contribution system based on employee contributions with individual accounts managed by a small number of Administradoras de Fondos de Pensiones (AFPs); and a framework for supplementary plans sponsored by employers (the APVC schemes).”
No. 6: United Kingdom
Given all we’ve heard recently about the travails of Prime Minister David Cameron and recent riots in London, we’re surprised by so high a ranking.
“The United Kingdom’s retirement income system comprises a flat-rate basic pension supported by an income-tested pension credit; an earnings-related pension based on revalued average lifetime salary; and voluntary private pensions, which may be occupational or personal,” the report explains. “Most of the larger voluntary occupational pensions are currently contracted-out of the earnings related social security benefit.”