By Elizabeth Bauer

The Melbourne Mercer Global Pension Index 2019 edition has been published, and the United States has been given a rank of C+ in this comparison of pension systems of 37 rich and middle-income countries, with a score of 60.6, slightly above the average of 59.3. Also in the C+ category were the UK and France; among the C countries were Spain, Austria and Italy; B countires included Canada, Ireland, and Germany.

Which countries were at the top of the rankings?

Why the Netherlands and Denmark, of course.

Regular readers will recall that I profiled Denmark’s retirement system back in September, in “Bernie Sanders Wants A Scandinavian-Model Social Insurance System. Sure, Why Not? (For Retirement Anyway).” It’s a three-part system, with a flat “basic retirement income” benefit for all residents and prorated for short residency in the country, a modest statutory flat-contribution benefit (literally flat contributions – everyone pays the same amount – not merely a level percentage of income), and high prevalence (90%) of employer provision of Defined Contribution retirement savings accounts, which protect plan participants from investment risk not by means of employers providing guarantees but through conservative investments.

The system is much the same in the Netherlands: a basic retirement benefit prorated for residency (see “Let’s Talk ‘Basic Retirement Income’ Social Security Reform: What Would It Look Like?”) combined with widespread prevalence of employer retirement benefit provision, traditionally in the form of traditional defined benefit plans sponsored by individual employers or industry-wide but now more commonly through defined contribution or “collective defined contribution,” which are characterized by risk-sharing among participants and potential benefit cuts if fund assets don’t meet investment return targets. Again, these plans are commonly invested in low-risk products such as deferred annuities.

So how is it that this type of system – a flat state-provided benefit paired with near-universal DC (or at any rate, employer-guarantee-less) benefits – finds its way to the top of Mercer’s ranking?

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