Canada was fourth last year, but more countries were included in this year's rankings, including Switzerland, which finished second behind the Netherlands.
Canada's overall score was lower at 69.9 compared to 73.2 last year.
"Not surprisingly, the (global financial crisis) has threatened the sustainability of public and private pension systems in several countries through the decline in asset values and an increase in government debt," said David Knox, a senior partner with consultancy group Mercer, which did the study on behalf of the Australian Centre for Financial Studies.
"This was reflected most acutely in the scores for Canada, the United Kingdom and the United States."
Scott Clausen, another partner with Mercer, said Canada could take moves to improve its pension system, such as increasing coverage in employment-based pension plans, particularly for "middle-income employees in the private sector."
It was also recommended that Canada consider raising the government-pension age of 65 as life expectancy continues to increase.
"Increased life expectancy is a theme that is common to all of the countries in the index," Knox said. "As the gap between pension age and life expectancy widens, pressure on public pension systems will increase. This highlights the need for governments to continue to review their state pension or retirement age, and focus on increasing the adequacy of the private system."
Rounding out the top five rankings is this study was Sweden at third and Australia at fourth. The United States was 10th, down from sixth last year.
A new report comparing pension systems in 14 countries, ranks the U.S. a lowly 10th, behind the Netherlands, Switzerland, Sweden, Australia, Canada, the United Kingdom, Chile, Brazil and Singapore. It leads France, Germany, Japan and China.
The index, compiled by Mercer and the Australian Centre for Financial Studies, attempts to compare the widely varying systems of the countries in three broad areas: adequacy, sustainability and integrity. Not surprisingly, the U.S. ranks low on adequacy—lower than Australia, Canada or any of the European nations. But it scores slightly above average on sustainability, meaning the ability to deliver what’s been promised. The U.S. had a score of 54 on adequacy and 59 on sustainability, compared with an average of 63 on adequacy and 52 on sustainability for all 14 countries and 76 on adequacy and 72 on sustainability for the top-ranked Netherlands.
By contrast, France scored 75 on adequacy, but only 30 on sustainability. That nation, of course, is now wracked by protests over President Nicolas Sarcozy’s push to make its pension system more sustainable by raising the minimum age for a partial pension from 60 to 62 and for a full pension from 65 to 67. In the U.S., the minimum age to receive Social Security retirement benefits is already 62, while the “full retirement age” for Social Security is now 66 and is slated to rise slowly to 67 for those born in 1960 or later. President Obama’s deficit reduction commission might recommend it go higher.
The U.S. integrity score of 60 was also well below the average of 73. That category includes such factors as regulation and costs.
Overall, the pension experts judged the U.S. system, as well as those in the UK and Canada, as less sustainable than just a year ago, when they conducted their first joint international study. David Knox, the senior partner in Mercer’s Retirement, Risk and Finance business who oversaw the study, said those three nations were the “most severely affected” by “declines in asset values since 2008 and increases in government debt.’’ Consultant Mercer is a subsidiary of Marsh & McLennan Companies.
Pensions are fast becoming the hot political issue of the next decade. Demographics, exploding debt and longer lifespans are all weighing on global pension systems. This is a long-term structural theme that will require tough political choices and compromises from all stakeholders. Below, an update on protests in France.