Comparing 25 countries’ pension systems, a recent report placed Denmark and the Netherlands at the top of their list with an “A” grade. The scoring metric was based on a weighted combination of sustainability (40%), adequacy (35%) and integrity (25%).
Where are we going? To pension problems and solutions.
Many countries are coping with more seniors who are living longer. When you pair that with lower fertility rates, weaker economies, high national debt and low interest rates, you have a problem.
You also have a low grade.
Classified as below average, the U.S. social security pension system got a “C” for sustainability, a “C” for adequacy and a “C+” for integrity. And, from 2014 to 2015, the U.S. sustainability grade dipped from 58.5 to 54.4.
- Sustainability takes us to the resilience of the public program’s funding.
- Meanwhile, asking if individual benefits will be adequate, the report cites a number of variables that can guarantee a sufficient stream of savings.
- Predictability, the integrity piece is about regulation and governance.
But where does this leave us?
A December, 2015 report from the Congressional Budget Office focused on 36 policy options that could help the U.S. program’s sustainability. Sadly though, they said that none of the options alone could have a big impact on future Social Security solvency.
These are the options:
Our Bottom Line: Social Security
Knowing the problems and the solutions, we can at least see why it is so tough to achieve a political resolution.
But few of us are happy with a “C” that will eventually be an “F” if we do nothing.
My sources…Combined, the CBO (Congressional Budget Office) report on Social Security and the world view prepared by the Australian Centre for Financial Studies and Mercer Consulting in the Melbourne Mercer analysis of 25 pension systems provide considerable insight about pension systems.