According to an annual global survey, the Netherlands and Denmark have secured their positions as having the best pension systems in the world, even as other countries struggle during the Covid-19 pandemic.
The countries again took the top two slots in the Mercer CFA Institute Global Pension Index published on Tuesday, drawing praise for holding their nerve and not allowing citizens to drain their accounts during the crisis, reports Bloomberg.
Due to the economic fallout from the Covid-19 crisis, scores of over half of the countries (20) slipped this year. The global recession has also led to reduced pension contributions, lower investment returns, and higher government debt in most countries.
"Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement," said David Knox, the report's author and senior partner at Mercer.
Stretched public finances mean public benefits, in particular, are under pressure, he said.
"We're actually going to have to rely on ourselves with private provision more and more."
Knox mentioned that pension systems such as those in Austria and Italy that hadn't built up substantial private funds are likely to come under increasing pressure. Both were given a C grade, coming in 28th and 29th respectively.
In the survey of 39 nations, Japan came in at No. 32 and was ranked with a D, a grade that reveals "major weaknesses and/or omissions that need to be addressed." A key recommendation included increasing the state pension age as life expectancy continues to increase in the nation.
Thailand and Argentina were in the bottom two slots and should increase support for the poorest and improve governance in private pensions, the report said.
The rankings, based on more than 50 metrics, assess whether a system leads to improved financial outcomes for retirees, whether it is sustainable and whether it has the trust and confidence of the community.
Leaders and Laggards
The United States came in 18th with a C+ grade, a system that has good features "but also has major risks and/or shortcomings that should be addressed," the report said, suggesting raising the minimum pension for low-income pensioners and increasing social security funding.
In the Netherlands, at present most workers enjoy defined benefit plans based on lifetime average earnings and a universal state pension. That means a worker gets about 80% of their pre-retirement earnings after stopping work, according to the Organization for Economic Co-operation and Development data.
That's a world away from the situation in Japan and the United Kingdom, where the so-called replacement rates are about 37% and 28% respectively.
An additional concern this year is the decision by some governments -- including Australia and Chile -- to allow individuals to tap their savings early.
"While these measures alleviate the short-term financial burden on citizens, they compromise savings for the future," said Janet Li, Mercer's head of wealth in Asia. "The implications will be huge and may create ripple effects, too, onto social and economic fronts."
The article originally appeared on Bloomberg and has been slightly modified