Executive Summary 2010

The provision of financial security in retirement is critical for both individuals and societies as most countries grapple with the social and economic effects of ageing populations. Yet, a comparison of the diverse retirement income systems around the world is not straightforward.

As the OECD (2009b) notes: “classifying pension systems and different retirement income schemes is difficult.” Furthermore, comparing these systems is certain to be controversial as every system has evolved from each country’s particular economic, social, cultural, political and historical circumstances. There is no perfect system that can be applied universally around the world. However there are certain features and characteristics of retirement income systems that are likely to lead to improved benefits, an increased likelihood of future sustainability of the system, and a greater level of confidence and trust within the community.

This study of fourteen countries has confirmed that no system is perfect. Indeed, for the second year in a row, no country’s system has received an index value above 80, which we consider represents an A-grade retirement income system. However, several countries have an index value between 65 and 80, which represents a B-grade system and – with some adjustments or improvements – these countries could be re-classified as A-grade systems. (The changes that would raise these systems to the A-grade level are discussed in Chapter 7 of the “index”.)

We believe that none of the countries in this pilot study has an E-grade system, which would be represented by an index value below 35. A score between 35 and 50, which represents a D-grade system, indicates a system that has some sound features but where there exist major omissions or weaknesses. A D-grade classification may also occur in the relatively early stages of the development of a particular country’s system.

Grade	Index Values	Countries	Description
A	65-80	Netherlands Switzerland Sweden Australia Canada	A system that has a sound structure, with many good features, but has some areas for improvement that differentiate it from an A-grade system.
B	<80	NIL	A first class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity.
C	50-65	UK Chile Brazil Singapore USA France Germany	A system that has some good features, but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned.
D	35-50	Japan China	A system that has some desirable features, but also has major weaknesses and/or omissions that need to be addressed. Without these improvements, its efficacy and sustainability are in doubt.
E	<35	NIL	A poor system that may be in the early stages of development or a non-existent system.