Thanks, in part, to a great retirement plan account annuitization system, Swiss people ages 65 and older have a median household income that’s about 50% higher than the median for U.S. people ages 65 and older.
Ronald Klein, director of the global aging research program at the Geneva Association, compares the Swiss, United Kingdom and U.S. employer-sponsored retirement plan systems in a new report aimed at policymakers.
“Of these three countries, Switzerland clearly has the best system, with automatic enrollment into occupational pension plans, automatic escalation of contributions as the employee grows older, and automatic annuitization,” Klein writes. “Of the three countries, the U.S. clearly has the worst system.”
The U.S. system is weak because it lets participants in 401(k) plans and other defined contribution plans cash out at age 59½, and because there is no guarantee that a defined contribution plan will offer any annuitization option, Klein writes.
The United States does seem to be moving in the right direction, with a number of proposals to help defined contribution plan participants annuitize their savings, Klein says.
A full copy of Klein’s report is available here.
The Geneva Association
The Geneva Association is an international equivalent of the United States’ LIMRA.
The organization itself calls itself “the leading international think tank of the insurance industry.”
The organization was founded 44 years ago and has its headquarters in Zürich, in Switzerland.
The current chairman of the association is the chairman of Aviva. But one of the four vice chairmen is John Strangfeld, the chief executive officer of Prudential Financial Inc.
Brian Duperrault, the president of American International Group Inc., is also on the association board.
How Europeans Think About Retirement Plans
In the new association report, Klein uses European “pillar” language to talk about retirement income programs.
Europeans use the term “Pillar I” to refer to government-run retirement income programs, such as the Social Security retirement income benefits program.
Europeans use the term “Pillar III” to refer to individual retirement savings arrangements, such as individual annuities purchased away from work.
Europeans use the term “Pillar II” to refer to occupational retirement benefits arrangements, such as traditional defined benefit pension plans, or 401(k) plans.
The Geneva Association released the report because it, like U.S. insurance groups, is working to persuade policymakers that annuitization arrangements from private insurers can help increase aging Baby Boomers’ well-being.