No country has figured out how to finance a third of your life out of the labor force. But some countries have better systems than others. The latest annual, Melbourne Mercer Global Pension Index , now in its tenth year, ranks the health and viability of national retirement systems around the world. It has once again awarded the Netherlands a top slot, and Denmark, last year’s winner, is right behind. They rank highly in terms of the level of benefits they supply, their sustainability (the Dutch and Danish don’t worry about their system going bust), and transparency. There are many things we can learn from their success, they show how most countries are on the wrong track. [...]
About 90% of Danes also have access to a retirement account through work. It is similar to the US’s 401(k), where employers and employees contribute to an account and employees bear the investment risk. The wide coverage is what makes Danish pensions so special: In the 1980s only 35% had access to a pension account through work. The increase comes from the roll out of new pension accounts that targeted blue-collar workers. Danes contribute between 12 to 18% to their employee pension accounts. Benefits are paid as an annuity after retirement, though sometimes Danes can take it as a lump sum.[...]
Argentina is at the bottom of the rankings, and offers lessons about what makes a retirement system work. It primarily relies on state pension funded mostly by current tax dollars like the other countries, but with erratic tax revenue the funding is not secure. Argentine pensions used to feature individual saving accounts until the state appropriated them in 2008. The Mercer report has concerns about the pension’s sustainability and if it offers enough to the poorest Argentines. It shows how a lack of transparency, unstable institutions, and fiscal pressure can undermine any pension system.
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