Canada ranks fifth worldwide for pension system

Netherlands, Switzerland, Sweden and Australia take top four spots

Canada ranks fifth when it comes to the adequacy, sustainability and integrity of its pension system, according to the annual Melbourne Mercer Global Pension Index. The country scored 69.9 (75 for adequacy, 56.8 for sustainability and 80.1 for integrity), ahead of the United States, United Kingdom and France.

In comparing pension systems from around the world — using more than 40 indicators which reflect features that are desirable in all retirement income systems — the Netherlands obtained top ranking with an index value of 78.3 in 2010, followed by Switzerland at 75.3, Sweden at 74.5 and Australia at 72.9.

There are several areas in the Canadian system that could be addressed to rank even higher, according to Scott Clausen, a partner at Mercer.

"Public policy makers should continue their focus on increasing pension plan coverage for middle income employees in the private sector."

Canada’s finance ministers are analyzing two options to reform the pension system: an expansion of the Canada Pension Plan (CPP) and a private sector solution.

The report recommended Canada's system could be improved by:

  • increasing the coverage of employees in occupational pension plans, possibly through a more efficient system
  • ensuring voluntary retirement savings are preserved for retirement purposes
  • introducing a mechanism to increase the government pension age of 65 as life expectancy continues to increase
  • increasing the level of household savings.

"Increased life expectancy is a theme that is common to all of the countries in the index. As the gap between pension age and life expectancy widens, pressure on public pension systems will increase,” said David Knox, a senior partner at Mercer's retirement, risk and finance business who oversaw the study. “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."

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