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Sustainability of pension systems : the netherlands champions; Canada is doing well

by

Hubert Roy

October 25, 2018 09:30

Photo : Rawpixel.com

If the olympic Games crowned the pension system more viable, the Netherlands would win the gold medal. Canada would finish for his tenth.

For Mercer, who had just published the world Index Mercer Melbourne, Canada has improved its performance. The consulting firm considers beneficial improvements made to the Québec pension Plan and the Canada pension Plan.

Even if the pension system remains robust, risks are looming on the horizon, ” says F. Hubert Tremblay, principal consultant at Mercer Canada. “The coverage of private sector workers by pension plans is low. The growth of the level of debt and costs related to health care will continue to put pressure on the retirement programs rather than capitalized, including the Pension of the old age Security. “

Efforts must therefore be made to find retirement options interesting for Canada, ” he said. Reduce costs, reduce the management responsibilities of the plans and provide Canadians with access to the best results are part of the solutions. Reconsider increasing the age of eligibility for pension plans of State to take account of the lengthening of life expectancy should also remain a axis of attention important, says Mr. Tremblay.

Why the Netherlands and Denmark, are they better than Canada ?

To David Knox, author of the world Index Mercer Melbourne, the starting point of a pension system world-class is to ensure the right balance between adequacy and sustainability. “This is a challenge that policy makers face,” he says.

He gives as example the case of a system offering very generous, which, in the short term, is unlikely to be viable. In contrast, a sustainable system over a long period of time may provide benefits in very few high. How to find the appropriate balance then ?

For Mr. Knox, a system must not only be viable or appropriate. A new dimension comes the debate about what constitutes a system of world-class, ” he says. It is the cover, and the proportion in which the adult population participates in the system.

“Some countries have managed to establish a wide coverage thanks to the introduction of pension systems mandatory in the workplace. In some cases, they have resorted to measures of automatic membership “, he explains.

He delivers a warning. “As a result of changes to the way people work in the world, we need to ensure that the strategies adopted, which include all the world, for the whole of the workforce saving for the future. This includes entrepreneurs, self-employed and any person benefiting from an income support, whether parental leave benefits, disability benefits or unemployment benefits. “

Life expectancy is increasing, it is necessary to take into account !

David Anderson, president of the international activities of Mercer, adds that the political leaders must not forget to take into account that the life expectancy continues to increase.

“The developed countries are aware of the demographic issues affecting their pension systems for some time already. In the less developed regions, it is encouraging to see many governments recognize the same trends in their populations and take appropriate actions. These measures promote the long-term sustainability of pension systems in the future, ” he said.

Mr. Anderson adds that several factors limit the ability of some jurisdictions to improve the security of retirement income. The ageing of populations, the sovereign debt high in some countries, and the global competition in terms of tax reduction are the main.

According to the directors of Mercer, it will be more difficult to ensure the long-term sustainability of some pension systems, because all the starting points are different and unique factors are in play. “Nevertheless, every country can take steps to improve its system. In the long term, there is no pension system is perfect, but the best practices principles are clear, and countries need to consider to create public policies and economic conditions that make possible the necessary changes “, they say.

Why Melbourne ?

For those who are wondering why the name of the city of Melbourne is in the name of the index from Mercer, it is because it is published by theAustralian Centre for Financial Studies (ACFS) in collaboration with Mercer and the State government of Victoria, which provides the largest share of funding. The index also benefits from the financial support of the Finnish Centre for Pensions.

The index uses three sub-indices – adequacy, sustainability and integrity – to measure each pension system based on more than 40 indicators. The table below shows the overall Index value for each country, as well as the value for each of the three sub-indices : adequacy, sustainability and integrity. Each Index value represents a score between 0 and 100.

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