Index reveals the best or worst of global retirement income systems
With populations worldwide trending older, the strength of each country’s retirement income system is of major importance.
But how do the various systems rank against each other? And where does Canada sit in the international rankings?
A new analysis by Mercer looked at systems covering 65% of the world’s population and found that there are some shortcomings, especially in gender parity.
Ranked for adequacy, sustainability, and integrity, Iceland came top of the annual Mercer CFA Institute Global Pension Index with an overall score of 84.2, followed by the Netherlands (83.5) and Denmark (82.0).
How Canada ranks
Canada scored 69.8 to put it ahead of countries including the US (61.4), Germany (67.9) and New Zealand (67.4).
While Canada held its ‘B’ rating, thanks in part to the savings rate and real economic growth rate, it is far from perfect with risks that need to be addressed, especially the aforementioned gender pension gap.
“While COVID-19 had a disproportionate impact on the retirement savings of certain groups, such as women, gender gaps in retirement savings have long existed,” said Scott Clausen, a Mercer Canada partner. “Employers are encouraged to review the design of their pension plans, as well as other compensation programs, to ensure that they are not unconsciously disadvantaging women in their workforce.”
Clausen also highlighted that most of the Canadian workforce are left to save for their pension themselves rather than through workplace schemes.
He added that increasing pension coverage is an opportunity to make Canada’s pension system stronger.
“Employers can provide a pension to their employees, while delegating the governance and administration responsibilities to a third party, by joining a collective defined benefit pension plan or by providing an outsourced defined contribution pension plan,” he said.
Global gender gap
Canada is not alone in needing to address the gender pension gap, but what’s causing it?
Mercer senior partner, Dr David Knox, author of the index report, said the causes are mixed and varied, including more women in part-time work, caring responsibilities, and lower average salaries.
“Every country and region has employment-related, pension design and socio-cultural issues contributing to women being far more disadvantaged than men when it comes to retirement income,” he said.
Dr Knox acknowledges that closing the gender pension gap is a huge challenge, but he warns the world cannot sit idle as data shows that poverty among older people is more prevalent for women.
“There are a number of actions that pension industries can take,” he said. “As a start, they must remove eligibility restrictions for individuals to join employment-related pension arrangements. Regardless of how much you earn, how much you work or how long you’ve been working for, every individual should have the ability to participate in a pension scheme that provides adequate benefits.”
Other ways to tackle the gender pension gap include the introduction of credits for those caring for the young and old.