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December 16,2017

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Countries With The Best Retirement Plans

Pension and healthcare systems vary greatly worldwide. The 2014 Melbourne Mercer Global Pension Index compared and ranked the pension systems of 25 countries across the Americas, Europe and the Asia Pacific based on each system’s adequacy, sustainability and integrity. For healthcare, The Commonwealth Fund’s latest report “Mirror, Mirror on the Wall – 2014 Update” ranked 11 countries, taking into consideration healthcare quality, access, efficiency, equity and healthy lives (i.e., mortality amenable to medical care, infant mortality and health life expectancy at age 60). Here, we take a look at the top five countries that appeared on both lists, providing an unofficial ranking of the countries with the best retirement plans.

Australia

Australia ranked second in the 2014 Melbourne Mercer Global Pension Index with an overall index value of 79.9. Its pension systems is comprised of an income-tied, aged-based pension funded by the government, a mandatory contribution from employers into a private fund, and voluntary contributions into a private retirement fund. Although Australia's score improved several points over 2013, the index notes that its pension system could improve by:

Introducing a requirement that part of the retirement benefit be taken as an income stream

Increased workforce participation among older workers

Increasing the pension age as life expectancies increase

Increasing the minimum access age to receive benefits from private pension plans

Australia has a publicly-funded universal healthcare system as well as a private healthcare system. A 1.5% Medicare levy helps fund the public system, and an additional 1% levy is charged to high-income earners who do not have private insurance. Australia ranked number four overall in the Mirror, Mirror report, with a number two finish for Quality Care.

Switzerland

Switzerland ranked fifth in the Pension Index with an overall index value of 73.9. Switzerland’s retirement income system includes an earnings-related public pension that has a minimum value, a mandatory occupational pension system with contributions that rise as age increases, and voluntary pension plans. The index notes that Switzerland’s ranking could be increased by:

Introducing a requirement that part of the retirement benefit be taken as an income stream

Reversing the preferential tax treatment of lump-sum payments in comparison to pension payments

Increasing the pension age as life expectancies increase

Limiting access to funds before retirement

In Switzerland, all citizens are guaranteed healthcare. All citizens are required to purchase basic health insurance, and private insurers must offer coverage to all citizens. Optional private “complementary” insurance policies provide coverage for certain treatments not included under basic insurance. Switzerland ranked second overall in the Mirror, Mirror report, with a first place finish in the Timeliness of Care category.

Netherlands

The Netherlands ranked third in the Pension Index with an overall index value of 79.2. Its retirement income system uses a flat-rate public pension and a semi-mandatory occupational pension linked to earnings and industrial agreements. Most employees in the Netherlands are members of these occupational plans, which are industry-wide defined-benefit plans; pensions are based on lifetime average earnings. The index finds that the overall index value could improve with:

The implementation of a minimum access age to preserve benefits for retirement

Increased household savings

Increased workforce participation among older workers

Increased member protection in the event of fraud, mismanagement or provider insolvency

Since 2006, all residents (and nonresidents who pay Dutch income tax) are required to buy health insurance, and insurers are required to accept all applicants. The Netherlands tied with Germany for fifth place overall in the Mirror, Mirror report, and second for Timeliness of Care.

Sweden

Sweden ranked sixth in the Index with an overall index value of 73.4. Sweden’s retirement income system was reorganized in 1999, and the new system is an earnings-related system with notional accounts. Everyone who has lived or worked in Sweden is entitled to a pension. The pension consists of three parts: income-based pension, premium pension and guarantee pension. The Income-based pension is the main part and is based on total lifetime earnings; the guarantee pension is available for those who have had little or no income. According to the Index, Sweden’s index value could be increased by:

Increasing the pension age as life expectancies increase

Allowing/encouraging employee contributions to employer-sponsored plans

Improving tax incentives for employee contributions

Protecting the pension interests of both parties in a divorce

Health coverage in Sweden is universal, and the health system must cover all legal residents. Asylum-seeking and undocumented children have the right to healthcare services, and adult asylum-seekers have access to care that cannot be deferred (e.g., maternity care). Sweden ranked third overall in the Mirror, Mirror report, and first in the Equity and Cost-Related Problem categories.

Canada

Canada received an overall index grade of 69.1, ranking seventh in the Index. Canada's retirement income system uses a universal flat-rate pension combined with an income-tied pension, an earnings-related pension derived from lifetime earnings, voluntary occupational pension schemes, as well as voluntary individual retirement savings plans. The index notes the overall index value for Canada could improve by:

Increasing coverage of employees in occupational pension plans

Increasing household savings

Introducing a national minimum age for accessing pension benefits

Increasing workforce participation among older workers

Canada has a national healthcare system that covers all provincial and territorial residents for medically necessary hospital, diagnostic and physician services. About two-thirds of Canadians have private health insurance to cover services not included under the public system. Canada ranked tenth overall in the Mirror, Mirror report, and fifth in the Cost-Related Problem category.

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