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Netherlands tops in global pension index; U.S. is 6th

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The Netherlands ranked first among 11 countries rated in a new index on their private and public retirement systems, with the United States coming in sixth.

The Melbourne Mercer Global Pension Index, created by New York-based benefit consultant Mercer L.L.C. and funded by the Victorian State Government of Australia, rated the retirement systems of 11 countries based on adequacy, sustainability and integrity.

The Netherlands received 76.1 out of a possible 100 points; followed by Australia at 74.0; Sweden, 73.5; Canada, 73.2; and the United Kingdom, 63.9.

The United States received 59.8 points. The lowest score went to Japan, with 41.5.

The U.S. system’s showing reflects its poor “adequacy of benefits,” the factor that comprises 40% of the ranking. The United States ranked ninth in this category because of the low level of retirement income for many median and low-income earners, said Arthur Noonan, a senior consultant and actuary in Mercer’s retirement, risk and finance business.

“The U.S. is on the back side of the middle of this group of countries, and we need to do better,” Mr. Noonan said. “Unfortunately, the private sector is pulling back by suspending 401(k) matching contributions and freezing or closing defined benefit plans.

Mr. Noonan said the United States. could improve its retirement system (and ranking) by raising the minimum pension for low-income workers, delaying retirement for workers, introducing a minimum access age for workers to tap their retirement savings, and requiring that retirees annuitize part of their benefits.

The Netherlands received the highest score because of its top ranking in both the adequacy of pension benefits and the integrity of its pension system. Pension benefits in the country come closer to matching preretirement income than in any of the countries evaluated, Mr. Noonan said.

The Dutch have also established pension funding rules that take into account the riskiness of the portfolio’s investments, with the goal of ensuring that funds will be adequate to meet the pension liabilities in both bad markets and good markets.

Jeff Nash is a reporter for Pensions & Investments, a sister publication of Business Insurance.