Rosalind Evans
For many, retirement represents a period of well-deserved rest, the opportunity to travel, pick up new hobbies, and spend quality time with loved ones. As people age, the hope is that financial concerns, particularly those related to health insurance and cost of living, will not be a predominant worry. However, with ongoing economic concerns such as the cost-of-living crisis, higher inflation, and interest rates, having a robust and efficient retirement income system has become more critical than ever. These systems vary significantly worldwide, from those that provide minimal provisions for retirees to those that are highly effective and thorough.
The Mercer CFA Institute Global Pension Index for 2023, published Tuesday, ranked the Netherlands as having the best retirement income system, followed by Iceland, Denmark, and Israel. “All of them have a first-class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity,” according to the research, with all scoring an “A” grade. The United States, however, scored a “C+,” placing it 22nd on the list, and was compared with Kazakhstan, Colombia, France, and Spain, which also received a “C+” grade. While there are “some good features” in their retirement systems, there are also “major risks” and “shortcomings” that need to be addressed to ensure their efficacy and long-term sustainability.
The report suggested several improvements for the U.S. retirement system, including introducing further restrictions to prevent people from accessing their pension funds before retirement, increasing the minimum pension for low-income pensioners, requiring that part of the retirement benefit be taken as an income stream, and improving how benefits factor into retirement.
The analysis in the report was based on over 50 factors, including government support and benefits, local economic growth, regulation, and communication. The report assessed 47 different retirement systems, each operating under other circumstances and contexts, with some data being difficult to compare. The U.K. ranked 10th with a “B” grade, along with Canada, New Zealand, and Germany. In contrast, countries like Mexico, Indonesia, and South Africa received a “C” grade, with Thailand, Turkey, India, the Philippines, and Argentina scoring even lower with a “D”.
The disparities in retirement income systems worldwide can significantly impact the quality of life for retirees. While some countries like the Netherlands, Iceland, Denmark, and Israel have established excellent systems that provide good benefits, are sustainable, and have a high level of integrity, others need to catch up. The United States, along with several other major economies, have areas that need improvement to ensure the long-term viability and effectiveness of their retirement systems. For those considering retiring abroad, it is essential to carefully research and evaluate the retirement income system in their chosen destination.
