Canada’s retirement income system maintained its “B” in the 2014 Melbourne Mercer Global Pension Index, reinforcing its position as one of the leading retirement income systems in the world.
The index measures 25 retirement income systems against more than 50 indicators for adequacy, sustainability and integrity. While Canada’s ranking fell from 6th to 7th after the addition of five new countries, Canada’s overall score in the index increased slightly from 67.9 to 69.1.
“Canada’s retirement system continues to be one of the strongest retirement systems in the world by providing a combination of universal pensions, income-tested pensions employer pensions, individual RRSPs and individual TFSAs, although there is always room for continued improvement” according to Scott Clausen, a partner in Mercer’s retirement business in Toronto.
Denmark continued to hold onto the top position this year with an overall score of 82.4. It has a well-funded pension system with good coverage, high asset levels and contributions, adequate benefits and a private pension system with developed regulations are the primary reasons for its top spot.
How can Canada’s retirement savings system improve?
Canadian system could be improved by:
- increasing the coverage of employees in occupational pension schemes through the development of an attractive product for those without an employer-sponsored scheme;
- increasing the level of household savings for middle income earners; and
- increasing the labour force participation rate amongst older workers.
“The retirement income of Canadians could also be improved by a reduction in the level of investment management fees charged under capital accumulation plans,” adds Clausen.
Certain provinces are implementing some of these measures. Quebec has introduced a Voluntary Retirement Savings Plans and Ontario plans to create an Ontario Retirement Pension Plan.