America’s pension system is failing to make the grade, according to a recent report from the Schwartz Center for Economic Policy Analysis.

“The United States’ pension system consistently ranks below other comparable countries, getting a barely passing grade of C+ in both the 2022 and 2023 Melbourne Mercer Pension Index rankings,” according to SCEPA.

Australia, Denmark and the Netherlands each scored grades of B+ or higher.

The difference between the United States and those other countries is that mandatory contributions and simple pension management systems provide more retirement benefits to a larger share of their workforce, according to the report. Data show that retirees in Australia, Denmark and the Netherlands receive greater pensions than their US counterparts, “regardless of how much they’ve worked in their lives,” authors said.

According to SCEPA, employer-based and private retirement savings plans found in the United States don’t create the same amount of financial security as state-mandated programs. SCEPA places at least part of the blame on the “complicated gauntlet of legal and financial regulations” that American workers must navigate.

“Nearly half (44%) of employer contributions to voluntary retirement plans go to the top 20% of earners. Employers know that complexity is such a problem that workers either refuse to participate in their plans or choose suboptimal plans,” SCEPA noted. “That complexity also adds to administrative overhead costs.”

The path forward for the American pension system, according to the group, could include guaranteed retirement accounts that would require contributions of 3% by both employers and employees from the beginning of their careers. Those accounts would have pooled investments and payouts in the form of annuities as well as “state- and city-led automatic enrollment into individual retirement plans; and expansion of the Thrift Savings Plan for low- and middle-income workers,” according to the report.

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