This compares to a U.S. ranking of 6th among 11 countries evaluated a year ago in the index, Mercer said in a news release.
“This year, as never before, U.S. policymakers and the private sector are challenged to fund retirement plans in a difficult economic and financial environment,” said Arthur Noonan, a senior consultant and actuary in Mercer’s Retirement, Risk and Finance business, in the news release. “The policy debate over the size of the federal deficit and the funding of social security at a time of an aging population are among the public sector concerns. The deficit in pension plans sponsored by S&P 1500 companies was $428 billion at the end of September according to a separate Mercer analysis that is nevertheless relevant to the Melbourne Mercer findings. This deficit corresponds to a funded status of 76%, compared to a funded status of 84% on December 31, 2009. Market volatility remains a concern in U.S. private sector pension plan funding.”
According to Mercer, challenges are not confined to the U.S. The following common themes emerge as many countries face similar problems in reforming retirement income systems to be robust enough to support a rapidly aging population:
- Increasing the pension age and/or retirement age to reflect increasing life expectancy, both now and in the future;
- Promoting higher labor force participation at older ages, particularly as many individuals now remain in good health for longer periods;
- Encouraging (or requiring) higher levels of saving, both within the pension system and beyond it;
- Increasing the coverage of employees in the private pension system, where it continues to be voluntary;
- Reducing the leakage from the retirement savings system prior to an individual’s retirement; and
- Promoting greater diversity in the provision of retirement income, while requiring that at least a portion of the accumulated benefit be taken as income.
The Melbourne Mercer Global Pension Index, produced by Mercer and the Australian Centre for Financial Studies, objectively ranks the retirement income system of 14 countries, looking at retirement income systems in their entirety, including both the publicly funded and private components of a system as well as personal assets and savings outside the pension system. In this year’s study, four new variables were included in the calculation of the index to assess: the costs of each country’s system; the level of home ownership; asset allocation; and the effect of divorce on the provision of retirement benefits.The full Melbourne Mercer Global Pension Index report may be accessed at http://www.mercer.com/globalpensionindex.