U.S. pension systems get a ‘lackluster’ score
BUSINESS RECORD STAFF Oct 19, 2015 | 3:35 pm
1 min read time
294 wordsAll Latest News, Banking and FinanceUnder the general measures of adequacy, sustainability and integrity, U.S. pension systems are continuing to drop through the ranks of the Melbourne Mercer Global Pension index, according to a release.
“The U.S. retirement system continues to rank in the middle of the pack. Concerns over the adequacy of the typical level of benefits provided under the U.S. system contribute to our lackluster score.” Emily Eaton, a senior consultant in Mercer’s International Consulting Group, said in the release.
Mercer, a subsidiary of Marsh & McLennan Cos. Inc., launched the index in 2011. It evaluates 25 retirement income systems against more than 50 indicators. The United States has slipped to No. 14 from 13th in 2014 and 11th in 2013. The index measures both public and private retirement systems.
An increase in expected average life expectancy and a reduced estimate of funding for Social Security are the key reasons the United States has dropped in the ranking, according to the release.
“The lack of employer-provided supplemental retirement benefits for many Americans and the relatively low labor force participation rates of our older workers are also contributing factors to the U.S. ranking,” Eaton said. “There have been a series of regulatory changes to address these issues, but additional action could improve the adequacy and sustainability of the US system.”
The U.S. retirement system could be improved by raising the minimum pension for low-income pensioners; adjusting the level of mandatory contributions to increase the net replacement for median-income earners; improving the vesting of benefits for all plan members and maintaining the real value of retained benefits through to retirement; reducing pre-retirement leakage by further limiting the access to funds before retirement; and introducing a requirement that part of the retirement benefit must be taken as an income stream.
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