Mercer released its tenth annual Melbourne Mercer Global Pension Index on Monday, finding the Netherlands and Denmark to be the countries most prepared to meet the challenge of ageing populations.
The two countries offer “world-class retirement income systems with good benefits,” Mercer stated in its report.
The U.S. pension system, on the other hand, was given a “C” rating.
The study, published by the Australian Centre for Financial Studies in collaboration with Mercer, looked at 34 pension systems and evaluated both their adequacy for individual retirees and their sustainability for the country’s economy as a whole.
David Knox, the study’s author and a senior partner at Mercer, said governments are grappling with how to balance adequacy and sustainability. “A system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is — what’s an appropriate trade-off?”
Knox said the index is “an important reference for policymakers around the world to learn from the most adequate and sustainable systems.”
He added: “We know there is no perfect system that can be applied universally, but there are many common features that can be shared for better outcomes.”
Many countries in northwestern Europe topped the index. The Netherlands, with an overall score of 80.3, beat Denmark, which had been the best-rated country for six years. Finland surpassed Australia for third position. Sweden finished fifth.
The U.K. and France were given “C+” ratings, with the U.K. score seeing marginal improvements on the basis of increased auto-enrollment contributions in employer plans. Singapore was rated best in Asia for the tenth year in a row.
Italy was the lowest-ranking country in Europe.
Peter Stewart, a global wealth consultant at Mercer, said the U.S.’s ranking should prompt reflection on how to move the system strategically.
“As the population continues to age and uncertainty persists in the global economic environment, there are mounting concerns about individuals’ ability to meet their spending needs in retirement,” he said. “The time is now to review America’s retirement framework and assess what changes could be made to improve the system.”