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U.S. Could Learn From Canada


As compared to the U.S., Australia, Canada, and the Netherlands provide higher retirement income for more of their citizens through their social security and universal/quasi-universal employer retirement plans, says a research brief. ‘Lessons for Private Sector Retirement Security from Australia, Canada, and the Netherlands,’ authored by John A. Turner, director of the Pension Policy Center, and Nari Rhee, manager of research for the National Institute on Retirement Security, says “U.S. policymakers are wise to look at successes in Canada, Australia, and the Netherlands to help get our retirement system back on track. While each country is unique, it's clear that universal coverage and risk-sharing are essential success factors in the three countries we studied. In sharp contrast, the U.S. system for private sector employees has low rates of retirement plan coverage. Furthermore, the large-scale shift from pensions to 401(k) accounts has shifted almost all of the funding, investment, and longevity risks to employees. So it's not surprising that the U.S. lags behind other advanced nations and that we have pronounced retirement insecurity for a majority of the U.S. workforce." While Canada has a voluntary, pension-centered employer-sponsored retirement benefit system with lower coverage than the Australian and Dutch systems, the brief says it has a highly progressive, two-part social security system that replaces more than 70 per cent of lifetime average wage-indexed earnings for low-income workers and about 50 per cent for median-income workers. As well, in Canada and the Netherlands, employee contributions to defined benefit plans, not just defined contribution plans, are tax deductible. This may be a factor in the relative strength of DB plans in those countries. The report is available at Retirement Lessons

Courtesy of Benefits and Pensions Monitor website News Alerts

 

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