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The Australian retirement income system scored 76.8 on the 2022 Mercer CFA Institute Global Pension Index and a B+ grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Australia’s retirement income comprises a means-tested government Age Pension at the national level, the Superannuation Guarantee program at the occupational level, and private products at the individual level.

National Level

The Age Pension is a means-tested, pay-as-you-go system funded by general government revenues. Only Australian residents (those who have resided there for at least 10 years in total with no break in residence for at least five years) who pass the income and asset tests (below a particular income and asset threshold) are eligible to get the Age Pension, but some may qualify with a reduced benefit. The current eligibility age is 66 and 6 months and will increase by six months every two years until it rises to 67 in 2023.

The combined couple rate of pension is set at 41.76 percent of Male Total Average Weekly Earnings. The single rate is two-thirds of the combined couple rate. The base pension are indexed twice a year in March and September, in line with the growth in Consumer Price Index and the Pensioner and Beneficiary Living Cost Index, whichever is greater. The pension is increased to the wages benchmark if the wages have a higher growth rate than prices.

Occupational Level

The Superannuation Guarantee is a compulsory employer contribution to private superannuation savings. It is relatively new to the system, introduced in 1992, but has been significant in increasing retirement security. Employers are required to contribute 10 percent of an employee’s earnings to a retirement account for workers between 18 and 70 years of age; the contribution will rise to 12 percent by July 2025. Contributions are not required for very-low-wage and part-time workers. Most employees are free to determine which fund they prefer their employers to pay into, but many allow default investment funds to be applied. Funds can be organized by a financial services company, employer or industry group, or through self-managed funds for five people or fewer.

While benefits in retirement can be accessed through different income streams, the vast majority of Australian retirees choose either the lump sum option or a phased withdrawal product, since there are few incentives to take out annuities. Early withdrawal from these accounts is highly restricted. While these accounts are taxed annually, retirement withdrawals are tax-free. Australians may begin to get superannuation benefits at age of 55 and the age requirement will increase to 60 by 2024. Those who are still working may also access their benefits, but only as a non-commutable income stream.

Starting July 1, 2017, the general concessional (before tax) contributions cap for superannuation dropped from $30,000 to $25,000 for everyone, regardless of age. Likewise, the non-concessional (after-tax) contributions cap dropped from $180,000 to $100,000, and will remain at $100,000 for the 2018/2019 financial year.

As of July 1, 2018, an individual can start to carry forward unused concessional cap amounts. As of July 1, 2019, an individual can play catch-up with concessional contributions (using unused portions of the annual concessional caps from one or more of the previous five years), if the individual has a total superannuation balance of less than $500,000 in super just before the start of the financial year.

Also as of July 1, 2018, the government will introduce downsizer contribution, meant to motivate individuals aged 65 years and above to downsize their homes, and make super contributions up to $300,000 outside the usual non-concessional contributions cap.

Individual Level

Voluntary savings make up the last level of the system. First, this includes voluntary employee contributions to the Superannuation Fund in addition to employer obligations. Second, many different private accounts and savings products are available and are employer-sponsored or individually funded.

Summary Sources

Australian Department of Social Services. “Age Pension.” Updated July 19, 2019. Accessed 1/13/2021.

Australian Department of Human Services. “Age Pension.” Updated September 30, 2020. Accessed 1/13/2021.

Australian Government. “Super for Employers.” The Australian Taxation Office. June 30, 2021. Accessed 07/06/2021.

Australian Government, The Treasury. “Superannuation Reform.” Accessed 1/13/2021.

AustralianSuper. “Why Choose AustralianSuper?” Accessed 1/13/2021.

May, Zachary. “Building a Publicly Sponsored Private Sector Retirement System: Lessons from Australia.” Georgetown Center for Retirement Initiatives. September 2016. Accessed 1/13/2021.

OECD. “Pensions at Glance 2019.” November 27, 2019. Accessed 1/13/2021.

SuperGuide. “Australian Age Pension rates (March 2020 to March 2021).” September 18, 2020. Accessed 1/13/2021.

Rao, Shoba. “New laws and changes that will affect Australia from January 1, 2018 and beyond.” News Corp Australia Network. January 6, 2018. Accessed 1/13/2021.

Current Issues

On June 22, 2021, Royal assent was received and the Super Reforms – Your Future, Your Super – became law. These reforms, beginning July 1, 2021 and November 1, 2021, include four major measures to strengthen and bolster Superannuation funds:

1. When employees transfer jobs, their superannuation will follow, thereby reducing the creation of unintentional multiple accounts.
2. A new interactive online YourSuper tool to compare data on MySuper products and enable better informed decision making for choosing funds.
3. A performance test for superannuation products that will assess whether funds meet an annual objective. If a fund is not meeting the performance goals, it will be required to disclose its performance to its members and will not be allowed to take on new members.
4. New duties and responsibilities for trustees of superannuation funds to increase transparency, including providing information about account management prior to Annual Members Meetings.

These reforms are estimated to add almost “A$100,000 ($77,160) to the retirement savings of young workers” and involve the most significant reforms since the beginning of the program in 1992. In addition, to recognize the impacts of the COVID-19 pandemic, Australians will be allowed to replenish their accounts that may have been depleted due to withdrawals allowed under the COVID-19 related early release scheme.

Summary Sources

The Australian Government. “Super Reforms – Your Future, Your Super.” The Australian Taxation Office. June 24, 2021. Accessed 07/06/2021.

Burgess, Matthew, Shery Ahn, and Paul Allen. “Australia Pension Reforms Worth A$100,000 For Each Young Worker.” Bloomberg Wealth. February 8, 2021. Accessed 07/06/2021.

Senator the Hon Jane Hume. “Superannuation reforms pass parliament – making your super work harder for you.” Joint media release with the Hon Josh Frydenberg MP Treasurer. June 17, 2021. Accessed 07/06/2021.

Current Issues

The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) bill was introduced in October 2021 and passed in February 2022. Among other things, the Bill amends the Superannuation Guarantee (Administration) Act 1992 to remove the A$450-a-month threshold before an employee’s salary or wages count towards the superannuation guarantee. In their executive summary, the lawmakers assert that the need for this cap no longer exists as its rationale has been since eroded by other legislation. For example, changes to the Treasury Laws that the government implemented in 2018 and 2019 have reduced the impact of financial risks on low-balance accounts. This reform aims to expand coverage of the Superannuation Guarantee to young, lower-income and part-time workers who may earn below the A$450 cap. There are other related reforms in the bill and a summary of each of the individual provisions may be viewed here.

Additionally, the Corporate Collective Investment Vehicle Framework and Other Measures Bill of 2021 passed in February 2022. The new covenant will require trustees to have a retirement income strategy that outlines how they plan to assist their members in retirement. Current legal obligations of superannuation trustees have focused primarily on the accumulation phase and there are no obligations to consider the needs of beneficiaries in retirement. The retirement income covenant will address this gap. A trustee’s retirement income strategy must consider how they will assist their members to balance maximizing their retirement income, managing risks to income, and having some flexible access to savings. This measure aims to give retirees confidence to spend their superannuation savings, while also enabling choice and competition in the retirement phase of the program.

The covenant will require trustees to have their strategy formulated in writing and a summary publicly available from 1 July 2022, however they are not required to give effect to all components of their strategy by this date. Instead, strategies are expected to evolve and develop over time, and it has always been expected that superannuation trustees should consider the retirement needs of their members. The covenant codifies this existing expectation.

Summary Sources

The Australian Government. “Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021.” Parliament of Australia. Accessed March 23, 2022.

Senator Jane Hume, Minister for Superannuation, Financial Service and the Digital Economy. “Retirement income covenant passes Parliament.” Australian Treasury. February 10, 2022. Accessed 03/30/2022.

Last Updated 3/30/22

Source: Georgetown University’s Center for Retirement Initiatives

The Canadian retirement income system scored 70.6 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Canada’s retirement income system comprises a government social security program at the national level, voluntary Employment Pension Plans at the occupational level, and private savings opportunities at the individual level.

National Level

The Canadian national pensions consist of two old-age schemes, the Old Age Security (OAS) and the Canada Pension Plan (CPP).

The Old Age Security (OAS) program is the Government of Canada’s largest pension program, which is administered by the federal government and is usually supplemented by local programs in most of Canada’s provinces and territories. It provides basic income to individuals 65 years and older, and is a pay-as-you-go system funded by general government revenues. OAS is a residence-based, income-tested, and taxable benefit. If the individual’s net income exceeds the threshold amount set for the year (CAD $79,054 for income year 2020 rising to $79,845 in income year 2021), the entire or part of the OAS pension is reduced as a monthly recovery tax. In addition to the OAS pension, there are three types of supplementary OAS benefits: Guaranteed Income Supplement (GIS) (for low-income individuals), Allowance, and Allowance for the Survivor. The payments of these benefits are based on individual’s marital status and level of income, and are non-taxable income.

The Canada Pension Plan (CPP) is a mandatory defined benefit plan for employees over the age of 18 who work in Canada (outside Quebec) and earn more than a minimum amount ($3,500 per year) to contribute throughout their lifetimes. Eligible employees can apply for and receive a full CPP retirement pension at age 65, as early as age 60 with a reduction, or as late as age 70 with an increase in benefits. The amount employees contribute is based on their employment income, which is affected by the CPP enhancement which started in 2019. Employees make contributions only on their annual earnings between minimum and maximum amounts. The maximum amount in the CPP is set each January ($61,600 for 2021), based on increases to the average wage in Canada. The contribution rate on these pensionable earnings is 10.9% and is split equally between employee and employer. Self-employed workers pay the full 10.9%, with contributions based on net business income (after expenses). The maximum contribution to the base CPP for employers and employees in 2021 is $3,166.45. The maximum contribution for the self-employed is $6,332.90.

The province of Quebec has a separate Quebec Pension Plan for its residents that is very similar to the CPP. The base plan is funded by contributions made by individuals who work in Québec and their employers. In 2021, the contribution rate for the Québec Pension Plan is 10.80%. That rate is split equally between the employer and the employee, and applies to earnings between the $3,500 general exemption and $61,600, which is the maximum amount on which employees can contribute in 2021. The additional plan is also funded by contributions made by individuals who work in Québec and their employers. In 2020, the contribution rate for this additional plan is 1%. That rate is split equally between the employer and employee.

On March 2, 2017, Canada’s governor general signed an order in council to bring the Canada Pension Plan enhancements into force. Ontario Province, which had separately passed the Ontario Retirement Pension Plan Act 2016 on June 2, 2016, joined the other provinces instead in implementing this expanded plan, which Canada’s provincial governments have been working on since June 2016.

Beginning on January 1, 2019, the enhancements started raising the contribution rate for employers and employees to 5.95% over a seven-year phase-in period. The enhanced CPP will also increase the maximum CPP retirement benefit by about 50 percent. It will increase the share of annual earnings received during retirement from a quarter to a third of an individual’s income. Workers will have to make approximately 40 years of contributions to accumulate fully the enhanced benefit.

Occupational Level

The Registered Pension Plan (RPP) is a form of a trust that provides pension benefits for an employee of a company upon retirement. These plans are voluntarily sponsored by employers and may be defined benefit, defined contribution, or a hybrid. Employers are the primary contributors in these plans, but employees often also contribute. RPPs are tax-deductible with investments being tax-deferred. They are also subject to annual contribution limits. RPP consists of two types: Single Employer Registered Pension Plans (SEPPs) and Multi-Employer Registered Pension Plans (MEPP). SEPPs are administered by plan sponsors. Employers are mandated to make contributions to the plan, but customarily decide on the amount of contribution. With MEPPs, two or more autonomous employers contribute to the same pension fund.

For defined benefit pension plans (DBPPs), the pension amount is usually based on an employee’s average highest earnings and the number of years of working. Both employee and employer contribute to the plan, and the funds are invested in a pension fund. The employer manages the investment and bears all the investment risk.

For the defined contribution pension plan (DCPP), the employee is required to contribute a certain percentage of their salary and the employer matches all or part of this contribution. Employee can tailor the investments in their personal pension accounts to fit their own investment goals and risk profiles. Employees who prefer to receive scheduled payments instead of lump-sum amount can transfer the funds from DCPP to other registered plans, including a Locked-in Retirement Income Fund (LRIF), Life Income Fund (LIF), or Life Annuity. The number of employees participating in an employer-sponsored pension plan has declined in recent years: Only 1 of every 3 Canadian workers has a workplace pension.

Individual Level

Private savings opportunities are available through employers or financial firms with different taxation characteristics.

Registered Retirement Savings Plans (RRSP) are voluntary, individual-defined contribution plans. Employer contributions are entirely voluntary. RRSPs are tax-deductible with investments being tax-deferred. They are also subject to annual contribution limits. The contribution limit to an RRSP account is 18% of the previous year’s earned income, up to a maximum of $27,830 in 2021. The government allows individuals to withdraw funds tax-free from their RRSP if they use the funds on buying or building a home (up to $35,000) or paying for education (up to $20,000). There are four types of RRSPs: Individual, Spousal, Group, and Pooled.

Pooled Registered Pension Plans (PRPP) are available to those who are self-employed and employees at small-sized companies who don’t have access to employer-sponsored programs. Members can benefit from cheaper administration costs and ease of portability for job-switching. However, a federal territory or province must pass enabling legislation to make this option available. Quebec has a version called the Voluntary Retirement Savings Plan.

A Tax-Free Savings Account is a more-flexible plan that allows Canadian residents who are 18 years or order to invest up to $6,000 annually tax-free in 2021. Members can withdraw money from their accounts at any time, for any reason, tax-free, and without penalty. It could be used for retirement income, as well as other investment income.

Summary Sources

Cross, Philip. “The Reality of Retirement Income in Canada.” Fraser Institute. April 2014. Accessed 02/02/2021.

Government of Canada. “Canada Pension Plan (CPP).” Updated November 4, 2020. Accessed 02/02/2021.

Government of Canada. “Old Age Security pension recovery tax.” Updated December 31, 2020. Accessed 02/02/2021.

Government of Canada. “Public pensions.” Updated February 04, 2020. Accessed 02/02/2021.

Kagan, Julia. “Registered Pension Plan (RPP).” Investopedia. Updated November 11, 2020. Accessed 02/02/2021.

OECD. “Pensions at a Glance 2019.” November 27, 2019. Accessed 02/02/2021.

Retraite Québec. “The Québec Pension Plan.” Accessed 02/02/2021.

“RRSPs: Know Your Limits.” Sun Life Global Investments. May 04, 2021. Accessed 07/08/2021.

Savvy New Canadians and Dollar Financials, “A Complete Guide to Canada’s Retirement Income System.” Accessed 02/02/2021.

Current Issues

Under the 2021 Budget (tabled on April 19, 2021), the Government of Canada included a variety of measures to strengthen its retirement plans and ensure financial security after the COVID-19 pandemic. These measures include making it easier to fix contribution errors in defined contribution (DC) pension plans, expanding retirement savings coverage for vulnerable workers, and increasing OAS benefits for Canadians 75 and over.

In order to expand coverage to vulnerable working populations, the Budget includes a proposal to fund $27.6 million over three years for my65+, a Group Tax-Free Savings Account offered by the Service Employees International Union (SEIU) Healthcare for SEIU employees and their families in order to incentivize worker participation in retirement savings plans. The goal will be to work with other unions and trade organizations to further support workers

To increase benefits for Canadians aged 75+, the government will grant a one-time payment of $500 in August 2021 to OAS pensioners (75 or over in June 2022) and increase OAS payments by 10% as of July 2022 by amending the Old Age Security Act.

Other measures include modernizing existing systems to allow for electronic return of certain information returns, expanding the scope of unclaimed asset regime to increase the available information needed to connect Canadians with their unclaimed assets, and revising the framework for Negotiated Contribution Pension Plans (NCPP) to enhance benefit sustainability, governance, and transparency.

Summary Source

DeBortoli, Karen and Tom Mudrinic. “2021 Federal Budget Outlines Path to Recovery.” Buck. April 21, 2021. Accessed 07/08/2021.

Federal Budget 2021. “Notice of Ways and Means Motion to amend the Income Tax Act and Other Related Legislation.” Department of Finance Canada. April 19, 2021. Accessed 07/08/2021.

Pension, Benefits & Executive Compensation Group. “2021 Federal Budget: Selected Pensions, Benefits and Executive Compensation Measures.” Blakes. April 22, 2021. Accessed 07/08/2021

Current Issues

To fill in the gap in COVID-19 relief support, the Government of Canada introduced An Act to amend the Old Age Security Act (Guaranteed Income Supplement). The Act makes sure that COVID-19 relief funding is not withdrawn/ recipients of welfare benefits don’t experience a decrease in payments because of their increase in income caused by various benefits.

Moreover, the Government announced in their 2021 Economic and Fiscal Update that it is allocating over C$700 million for one-time payments to eligible seniors who received benefits in 2020, and whose benefits payments were negatively affected due to their rise in income. This one-time payment is scheduled to be distributed in April 2022.

This Act amends the Old Age Security Act to make sure that this issue does not re-occur.

Summary Source

Government of Canada. “An Act to amend the Old Age Security Act (Guaranteed Income Supplement).” Parliament of Canada. February 8, 2022. Accessed 03/23/2022.

Government of Canada. “Government of Canada introduces legislation to support low-income seniors who received pandemic benefits.” Employment and Social Development Canada. February 8, 2022. Accessed 03/23/2022.

Yahoo!Finance. “Legislation to support low-income seniors who received pandemic benefits receives royal assent.” Canada NewsWire. March 2, 2022. Accessed 03/23/2022.

Last Updated 3/23/22

Source: Georgetown University’s Center for Retirement Initiatives

The Chilean retirement income system scored 68.3 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Chile’s retirement income system comprises poverty prevention programs at the national level, employer-sponsored pension plans (APVCs) at the occupational level, and Mandatory Individual Accounts at the individual level.

National Level

Poverty prevention programs are funded by general government revenues and are available to citizens 65 and older.

The Basic Solidarity Pension is the basic pension, which provides benefits to those who pass a means test (earnings lower than three times the legal monthly minimum wage), but have not contributed to individual accounts during their working lives.

The Pension Solidarity Complement is available to those who pass the means test and contributed to individual accounts during their working lives but whose pension benefits fall below a set monthly level (PMAS)

However, these programs are in the process of being phased out in favor of a new, more comprehensive and wide-reaching program; the Universal Guaranteed Pension (PGU), enacted by the new government in late January 2022.

Like its predecessors, PGU will be paid to all long-term residents aged 65 or older; have at least 20 years of residency in Chile since age 20, including at least 4 of the last 5 years before the pension is claimed; and have monthly base pension income below 1 million pesos (US$1,248.81). However, PGU will expand its scope to include 90% of that population, rather than the 60% that was covered by its predecessors. All those who were enrolled/ qualified for the current programs will be automatically eligible for PGU; moreover, all those enrolled in the current programs will receive PGU up until August 1 (when the phasing-in of the program is expected to be complete) without registering. For the poorest individuals, the full monthly benefit amount will be 185,000 pesos (US$231.03), which will decrease proportionally as the individual’s monthly base pension income rises.

Occupational Level

Mandatory Individual Accounts are a fully funded system constituting the second part of Chile’s retirement system. A worker is required to contribute 10 percent of earnings and a 1.25% administrative fee to an individual account and employers may contribute voluntarily; the self-employed contribute the same amount as other workers. The maximum monthly earnings used to calculate contributions are 80.2 UF (as of 2021). This ceiling is adjusted annually based on changes in real wages in the previous year. They are free to choose an Administradora de Fondos de Pensiones (AFP) to manage their accounts, for which they pay administrative charges besides their mandatory contribution, and may switch to another AFP at any time for a fee. AFPs are government-regulated private companies that exclusively manage and administer pension funds. Contributions are tax-deferred. Benefits can be collected at the normal retirement age, which is 65 for men and 60 for women. Early retirement is available if an individual’s account can achieve a 70% replacement rate and equals 80% of the Pension Solidarity Complement.

There are several withdrawal options:

Programmed withdrawals allow the worker to retain ownership to the account while receiving a monthly annuity. Any remaining balance can be left to heirs.

A life annuity allows a life insurance company to take ownership of an individual’s account, with the individual receiving an inflation-adjusted monthly annuity.

Temporary income with deferred life annuity is a combination of the previous two types; temporary programmed monthly withdrawals are made until the life insurance starts to pay a life annuity, allowing the worker to retain ownership of the assets in the account until the life annuity begins.

Immediate annuity plus programmed withdrawals is another hybrid, where a portion of the account is used to purchase an immediate annuity and the remainder is paid as programmed withdrawals.

APVC (Ahorro Previsional Voluntario Colectivo) is an employer-sponsored, collective voluntary pension plan. It includes major tax benefits and subsidies for employers to motivate employers to offer more retirement pension options for their employees. The plans contain different investment, coverage, and contribution features.

Individual Level

Voluntary savings opportunities are also available through employers or financial firms. Different plans can take contributions using pre-tax or after-tax income for tax-deferred or tax-free withdrawals, respectively. The government also offers tax incentives for employers to promote employer-sponsored voluntary pension plans.

Summary Sources

Bnamericas. “Regulators Soften Rules on Employer-sponsored Pension Plans.” April 12, 2011. Accessed 01/27/2021.

Congressional Research Service. “Chile’s Pension System: Background in Brief.” Shelton, Alison M. R2449. March 28, 2012. Accessed 01/27/2021.

International Social Security Association. “Country Profiles: Chile.” July 2019. Accessed 01/27/2021.

Kritzer, Barbara E. “Chile’s Next Generation Pension Reform.” Social Security Bulletin 68(2). 2008. Accessed 01/27/2021.

OECD. “Pensions at a Glance 2019.” November 27, 2019. Accessed 01/27/2021.

OECD. “Pensions at a Glance 2021: Country Profiles – Chile.” December 8, 2021. Accessed 03/28/2022.

Social Security Administration. “International Update.” February 2022. Accessed 03/28/2022.

Swiss Life. “Chile: Collective Voluntary Pension Saving (APVC) Plans Broaden Cruz del Sur’s Employee Benefits Programme.” September 6, 2009. Accessed 01/27/2021.

Current Issues

Legislation allowing retirees with annuities to access 10 percent of their occupational level pensions was approved by Chile’s Congress and signed into law in late April 2021 following legal challenges brought to the Constitutional Court by President Piñera. This was the third such approved withdrawal, following two measures in July and November of 2020 that each allowed withdrawals of 10 percent. The passage of the measure in July 2020 saw withdrawals of $19 billion. The second round of withdrawal in May 202 totaled nearly $15 billion. Following the third round of withdrawals and as of late 2021, the total amount withdrawn totaled over $48 billion, or 25% of pre-pandemic assets from the pension fund. These measures follow protests in recent years that criticized the current occupational level pension system for charging high fees and providing inadequate benefits – about 80 percent of retirees currently receive less than the minimum wage. While the government has pledged a $29 billion (close to 12% of GDP) economic stimulus package to include spot payments, it has been criticized as insufficient.

Debates about a fourth round of withdrawals continued through the general and presidential election season in October and November of 2021. The proposal ended up being struck down in December due to general discontent with the pension system, the criticism it received from the Chilean central bank, and opposition from the newly-former President Piñera and his government, despite the fact that President-elect Boric largely supported the scheme and he now will continue these discussion as he begin his new term of office.

In February 2022, President Boric’s government extended its commitment to reforming the pension system and replacing the current, private system with a public one. According to Finance Minister Mario Marcel, the driving force behind this reform are the problems plaguing the current arrangement, including a very low level of contributions from employees and employers alike. The reform is now in its consultation process, which is expected to last some months.

Finally, on March 11, Chile’s government enacted an amendment expanding social security coverage and other employment protections to workers employed through digital platforms – a growing class of contract workers who will now be reclassified as either formal employees or self-employed. This reform will affect around 189,000 workers in Chile, which represents about 2.2 percent of the country’s labor force.”

Summary Sources

Aislinn Lang and Natalia A. Ramos Miranda. “Chilean lawmakers help pensions withdrawal plan over first hurdle.” Reuters. November 10, 2020. Accessed 01/27/2021.

Benedict Mander and Michael Stott. “Chile’s famed pensions system faces an existential crisis.” Financial Times. November 15, 2020. Accesssed 01/27/2021.

Bnamericas. “Chile annuities withdrawal bill advances, govt says will challenge.” January 8, 2021. Last accessed 01/27/2021.

Bnamericas. “Citing expropriation risk, Chile lawmaker supports 100% pension withdrawal.” June 04, 2021. Accessed 07/08/2021.

Fabián Andrés Cambero. “Chile plans to reform controversial pension program next year.” Reuters. March 22, 2022. Accessed 03/28/2022.

Fabián Andrés Cambero. “UPDATE 1-Chile Congress rejects fourth pension withdrawal bill.” Reuters. December 3, 2021. Accessed 03/28/2022.

Malinowski, Matthew and Valentina Fuentes. “Chile Pension Furor Grows Over Third Round of Withdrawals.” Bloomberg. April 22, 2021. Accessed 07/08/2021.

OECD. “Pensions at a Glance 2021: Country Profiles – Chile.” December 8, 2021. Accessed 03/28/2022.

Sebastian Boyd. “How Chile’s Pension System Became a Covid Piggy Bank.” October 29, 2021. Accessed 03/28/2022.

Sherwood, Dave, and editing by Steve Orlofsky. “Chileans drain $10 bln more from pension funds as pandemic drives withdrawals.” Reuters. May 12, 2021. Accessed 07/08/2021.

Social Security Administration. “International Update.” February 2022. Accessed 05/13/2022.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 5/13/22

The Danish retirement income system scored 82 on the 2022 Mercer CFA Institute Global Pension Index, and an A grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. The Danish retirement income system comprises a public pension scheme, a means-tested supplementary pension benefit, a fully funded DC scheme with lifetime income at the occupational level, and mandatory occupational DC schemes.

National Level

The national pensions consist of two old-age pension schemes: the public pension (folkepension) and the Labour Market Supplementary Pension (ATP).

The public pension is a universal, residence-based scheme on a pay-as-you-go basis. The total cost of this public pension is financed by government. The pension consists of an earnings-tested basic pension and an income-tested supplemental pension. This benefit is available to those with at least 40 years of residence in the country from age 15 to the normal retirement age and is prorated for those with fewer years of residency. The retirement age will rise from its current 65 to 67 between the years 2019 to 2022, then to 68 by 2030, rising based on life expectancy starting in 2035. The flat-rate amount is tested against income above a significant level. The supplement is tested against earned, capital, and pension income, which is targeted to the pensioners with little to no income besides the full old-age pension.

The ATP is a statutory, fully funded, collective, insurance-based, defined-contribution scheme that applies to all workers who work more than nine hours a week. The contributions are mandatory, but vary according to the number of hours worked, with a full-time employee paying DKK 3,408 per year in 2021. An employee pays one-third of the contribution while the employer provides two-thirds. At retirement, the account may be taken as a lump sum if it is below a threshold or a taxable annuity. ATP membership is voluntary for the self-employed.

The Senior Pension is a new pension scheme providing early retirement for individuals with diminished work capacity. It is available for people up to 6 years before reaching the normal retirement age as long as they have worked at least 20 to 25 years in full-time employment and are unable to work more than 15 hours per week in their most recent jobs. A monthly pension of up to 19,092 kroner (US$2,861.13) if single, or 16,229 kroner (US$2,432.08) if married or partnered, is available in 2020. This amount may be reduced depending on levels of external income.

Occupational Level

Occupational pensions include company-specific and agreement-based pensions. Financing, contributions, and benefits for the former vary depending on the plan. Agreement-based plans are significantly more common and typically cover one particular industry. Contributions vary between 10% and 18% across industries, with a default rate of 12%. Those plans are fully funded by not-for-profit life insurance companies that have shared ownership between employer associations and unions. Actual contribution levels for employees and employers vary; however, employer contributions are mandatory with employers and employees funding two-thirds and one-third, respectively. Early retirement with a lower pension is possible beginning at 60 years of age.

Since 2018, all employees over age 26 have been required to contribute at least 0.25% of income toward retirement savings, which would gradually increase to 2% by 2025. This savings requirement would be waived for individuals already contributing 6% or more to an employer-provided retirement plan, while not requiring employers to contribute on behalf of the individual.

Individual Level

Other private products complete this system. These plans and financial products vary in contribution, regulations, and benefits. These accounts can be created by an individual or through an employee’s company and receive favorable tax treatment. Investment flexibility is largest among these products compared to the other levels. It is common for these plans to have much-higher administrative costs compared to the ATP or occupational pensions.

On January 1, 2018, Denmark implemented reforms to the voluntary old-age savings program that had been passed in the Danish parliament on December 19, 2017. The reforms include adjusting annual contribution limits, expanding payment options, raising minimum and maximum pensionable ages, and eliminating public benefit reductions or cessations. These reforms represent the first part of a larger reform agenda (commonly referred to as the 2025 Plan) aimed at reducing financial pressures on the public pension system by encouraging longer working lives and more private savings.

Summary Sources

European Commission. “Pension Adequacy Report 2018, Current and Future Income Adequacy in Old Age in the EU, Volume 2 – Country Profiles.” 2018. Accessed 02/04/2021.

Life in Denmark. “State Pension.” Accessed 02/04/2021.

OECD. “Pensions at a Glance 2019.” December 5, 2017. Accessed 02/04/2021.

OECD. “Pensions at a Glance 2021: Country Profiles – Denmark.” December 8, 2022. Accessed March 28, 2022.

Social Security Administration. “Denmark Implements Reforms to Voluntary Retirement Savings Program.” February 2018. Accessed 02/04/2021.

Social Security Administration. “International Update.” January 2020. Accessed 02/04/2021.

Social Security Administration. “Social Security Programs Throughout the World: Europe, 2018 (Denmark).” September 2018. Accessed 02/04/2021.

Current Issues

On December 21, 2020, the Danish government reached an agreement to fund early retirement for certain workers by introducing an extra tax on the financial industry. Individuals who have at least 42 years of employment by age 61 can now qualify for a new early pension (tidlig pension) up to three years prior to the normal retirement age of 67 (individuals who have worked for 42 years qualify for 1-year early retirement, those with 43 years qualify for 2 years early retirement, and those with 44 years qualify for 3 years of early retirement). If ATP contributions are paid on earnings, both periods of employment and self-employment will count toward an individual’s minimum employment requirement, as well as periods of work outside of Denmark, compulsory work training, and social security benefit receipt. Those who qualify will receive an early pension equal to the full state pension (folkepension) normally granted to single individuals at the national retirement age and will only be reduced if a pensioner has gross annual earnings exceeding 24,000 kroner (US$3,957.91) or pension assets exceeding 2 million kroner (US$330,000). When the individual reaches the national retirement age the early pension will end and they will begin receiving the normal state pension which may be adjusted based on marital status or a spouse’s financial resources.

By granting early retirement to eligible individuals, this agreement aims to help workers in industries with physically demanding labor conditions and who tend to have entered the workforce earlier. Over 41,000 individuals will qualify for this pension, and the government estimates that 24,000 of these individuals will apply for it, thereby costing 2.2 billion kroner (US$363 million) for its first year and 3.1 billion kroner (US$511 million) a year by 2025.

Summary Sources

Jepser Starn. “Denmark Agrees to Let Banks Fund Early Retirement for Workers.” Bloomberg. October 10, 2020. Accessed 2/4/2021.

Jacob Gronholt-Pedersen. “Thousands of Danes could retire early under government pension reform.” Reuters UK. August 18, 2020. Accessed 2/4/2021.

Danforth, Ben, John Jankowski, and David Rajnes. “International Update, January 2021: Denmark Approves Early Pension.” Social Security Research, Statistics, and Policy Analysis. January 2021. Accessed 07/08/2021.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 3/28/22

The Finnish retirement income system scored 77.2 on the 2022 Mercer CFA Institute Global Pension Index, and B+ grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. The Finnish retirement income system comprises a basic pension at the national level, earnings-related pensions at the occupational level, and private products at the individual level.

National Level

At the national level, Finland has a universal pay-as-you-go system with two types of pension schemes to ensure a “basic livelihood.” The national pension and guaranteed pension ensure that individuals who have either no or a very small amount of savings still receive a consistent pension. The full monthly national pension in 2021 for a single person is EUR 665.29, and, for a married or cohabiting person, it is EUR 593.97. The amount of national pension one receives depends on the amount of earnings-related pension one has accrued – for each euro of earnings-related pension accrued, the national pension is reduced by 50 cents until no national pension is granted. Full benefits are payable to those residing in the country 80% of the period from age 16 to 64) and is prorated for those with at least three years of residency.

The guaranteed pension ensures the economic welfare of low-income pensioners. If the pension recipient’s total national and earnings-related pensions amount to less than the lower pension income level stipulated by law, the difference is paid in the form of a guaranteed pension. In 2021, The minimum pension income limit is EUR 837.59 per month.

Occupational Level

The earnings-related pensions are a partially funded system that is compulsory for all workers (referred to by its acronym TyEL). The employees’ contribution in 2021 will be 7.15% of their monthly gross wage for persons under the age of 53 or over 62. For persons between the ages of 53 and 62, the contribution rate will be 8.65%. The average contribution for employers will be 16.95%. There are no caps on how much an individual may contribute. The retirement age ranges from 63 to 68. The lower age will reach 65 by 2027, and then be based on life expectancy starting in 2030. The upper age will reach 70 by 2027, and be based on life expectancy starting in 2030. For people born after 1965, the retirement age will be determined by life expectancy as of the year 2030 and life expectancy is determined separately for each age group.

According to new reforms introduced in 2017, while everyone will earn pensions at a rate of 1.5% of their gross annual earnings, the pension funds that one has accrued will rise by 0.4% for each month that an employee defers retirement. The benefits are indexed. They are tax-exempt as well, if this happens to be the sole source of income for an individual.

Also, one can now retire as early as age 61 on a partial old-age pension and draw 25% or 50% of the pension that has accrued up to that time. However, the part drawn out would be permanently reduced by 0.4% for each month, beginning from when the individual starts drawing out the pension through the month after which reaching retirement age. In addition, a new years-of-service pension has been introduced for people aged 63 or older and having 38 years or longer history of work that required great mental or physical effort.

On January 1, 2019, Finland introduced an electronic national income register to centralize data on pay, pensions, and benefits. The register will eliminate the need for employers to make annual declarations to the authorities responsible for tax, social security, and unemployment insurance, while pension companies will use the reported monthly salaries to calculate statutory pension contributions and payments.

Individual Level

Lastly, private voluntary savings opportunities are available. These include many different accounts and savings products that have differing taxation and benefit characteristics, including voluntary occupational plans, which accrue at the same rates as earnings-related programs by the state.

Summary Sources

Activpayroll. “Preparing for Finland’s National Incomes Register.” December 4, 2018. Accessed 03/26/2020.

Finnish Centre for Pensions. Accessed 03/26/2020.

Finnish Centre for Pensions. “Earnings-related pension contributions in 2020” Accessed 03/26/2020.

Finnish Centre for Pensions. “System Description.” Accessed 06/24/2021.

Finnish Centre for Pensions. “Statutory social insurance contributions in Finland in 2021.” Accessed 06/24/2021.

InfoFinland. “The Finnish pension system” Accessed 03/26/2020.

Kela. “Guarantee pension.” Updated January 1, 2019. Accessed 03/26/2020

Moss, Gail. “Regulation Roundup: Pension outlook in Europe.” Investment & Pensions Europe. March 2017. Accessed 03/26/2020.

Social Security Administration. “Social Security Programs Throughout the World: Europe, 2018 (Finland).” September 2018. Accessed 03/26/2020.

Tyoelake.fi. “Different pensions” Accessed 03/26/2020.

Tyoelake.fi. “New in Finland” Accessed 03/26/2020.

Current Issues

In March 2020, the Finnish government passed a EUR 15 billion package to support workers and corporations during the COVID-19 pandemic. This package included a temporary measure to reduce the private sector’s pension contributions by 2.6% – in effect from June 2020 – December 2020. The government also ordered the State Pension Fund (VER) to invest EUR 0.5-1 billion into commercial papers to increase and support short-term liquidity and facilitate easier re-borrowing of pension contributions. Some measures taken by private employment pension companies also included allowing companies to apply for an extension to their payment term – up to 3 months – for employee pension payments with 2% interest (TyEL and YEL) (Requiring final approval from the government). Other measures may include using an EMU-buffer to potentially decrease employee pension contributions.

Summary Sources

“Finland Government and Institution Measures in Response to COVID-19.” KPMG. Last updated November 18, 2020. Accessed 06/24/2021.

“Policy Responses to COVID-19.” International Monetary Fund. Last updated June 10, 2021. Accessed 06/22/2021.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 3/28/22

The Japanese retirement income system scored 54.5 on the 2022 Mercer CFA Institute Global Pension Index and a C grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Japan’s retirement income system is comprised of a National Pension System at the national level, the Employees’ Pension Insurance (EPI) at the occupational level, and other private products at the individual level.

National Level

The Japanese national pension consists of two old-age pension schemes, the National Pension Plan (NPP), and the Employees’ Pension Insurance (EPI).

The National Pension Plan (NPP), Kokumin Nenkin is partially a pay-as-you-go system. Half of the cost is financed by the government, while the other half consists of residents’ contributions. It is mandatory for people ages 20 to 59 to pay a flat contribution amount (￥16,610 per month for the fiscal year 2021) (discount and exemption applied under certain circumstances). Every Japanese resident receives a basic flat-rate benefit. This benefit is available when a person reaches 65 years and has contributed for at least 10 years. To receive the full benefit, 40 years of contributions must be made, while those with contributions for between 10 and 40 years receive adjusted benefits. Early retirement is available between the ages of 60 to 64 with a benefit reduction of 0.5% for each month of retirement before age 65. Deferred retirement is permitted until age 70, with a benefit increase of 0.7% for each month of deferral after one month past age 65. Both the NPP and the Employees’ Pension Insurance (below) are subject to annual automatic adjustments based on changes in the cost of living and the national average wage.

The Employees’ Pension Insurance (EPI), kosei nenkin is an earnings-related program. It is mandatory for corporations above a certain size, and contributions are split between employers and employees. Employee and employer pay an equal contribution rate of 9.15% of monthly wage-class earnings, based on 31 wage classes. EPI is not applicable to self-employed people. The government covers the total cost of administration and contributes as an employer.

The retirement age is set to rise gradually from the current 62 to age 65 for men by 2025 and from 61 to 65 for women by 2030. The benefits are calculated in a formula based on an insured’s average monthly wage over the full career, date of birth, and number of months of coverage. For working pensioners aged 60 to 64, the full pension is paid if their combined monthly earnings and old-age pension incomes do not exceed ¥280,000. They will receive a 50% reduction of their benefit if their monthly earnings are between ¥280,000–460,000; the benefit is further reduced if monthly earnings exceed ¥460,000. For working pensioners aged 65 or older, the pension is reduced by 50% of the amount exceeding ¥470,000 if the combined monthly earnings and old-age pension income exceed ¥470,000.

Occupational Level

The Employees’ Pension Fund (EPF) is the traditional voluntary occupational pension. New defined contribution and defined benefit plans were introduced in 2001 and 2002.

The EPFs are a defined benefit scheme that cover firms with more than 500 employees. The first part substitutes the Employee Pension Insurance (EPI). Firms may opt out of the public scheme if their EPF provides 50% higher benefits than EPI, and it is subject to the same benefit formula as applied to the EPI and is paid as an annuity. The second component offers complementary pension benefits. EPF is managed by a management committee with an equal number of employer and employee representatives. The bill to terminate EPFs came into effect in April 2014. Financially stable EPFs are being contracted out or dissolved by 2019 and no new EPFs can be set up. Financially sound EPFs are encouraged to switch to other types of pension plans.

Defined benefit plans can be of the fund or the contract type; both can be established by one or a group of employers. Fund plans must be implemented by establishing a pension fund separate from the sponsoring employer. The pension fund is managed by a management committee, the same as an EPF. Contract-type plans are managed by banks or life insurance companies. Employer contributions for defined benefit plans are tax-deductible without limits. Employee contributions are permitted and are tax-deductible up to a limit of ￥50,000 per year.

Defined contribution plans must be implemented through a contract with a pension management organization. Self-employed people or employees whose employers do not operate an occupational pension plan can establish a personal defined contribution plan, which are managed by the National Pension Fund Association. Employers are required to pay the total contribution, while employee contributions are prohibited. Additionally, the plan must offer its members a choice among at least three investment options, and members must have the opportunity to switch every three months. Members can withdraw their capital as a lump sum.

Individual Level

Additional products for purchase include personal pensions through private insurance companies and trust banks.

Summary Sources

Abe, Jiro, et al. “Regulation of State and Supplementary Pension Schemes in Japan: Overview.” Thomson Reuters Practical Law. October 1, 2022. Accessed March 30, 2022.

Japan Pension Service. “Overview of Japanese Social Insurance Systems. Accessed 04/16/2020.

National Institute of Population and Social Security Research (Japan). “Social Security in Japan 2014.” Accessed 04/16/2020.

National Institute of Population and Social Security Research (Japan). “Population and Social Security in Japan” July 26, 2019. Accessed 04/16/2020.

OECD. “Pensions at a Glance 2019: Country Profiles – Japan.” November 27, 2019. Accessed 04/16/2020.

OECD. “Pensions at a Glance 2021:  Country Profiles – Japan.” December 8, 2022. Accessed 03/30/2022.

Pension Funds Online. “Pension System in Japan.” Accessed 04/16/2020.

Social Security Administration. “Social Security Programs Throughout the World: Asia and the Pacific, 2018 (Japan).” September 2018. Accessed 04/16/2020.

Current Issues

On May 29, 2020, the Japanese parliament approved a package to reform the pension system. This package included expanding the range of part-time workers who can join the Employees’ Pension Insurance (EPI or kōsei nenkin), which has only been mandatory for corporations above a certain size until now. The measure is aimed at increasing the number of people paying into the system, especially women and elderly workers who tend to hold part-time jobs at higher rates.

Beginning October 2022, employees working at companies with 101 or more employees will be subject to the EPI. Those employed by companies with 51 or more employees will become eligible beginning October 2024. Currently, only companies with 501 or more employees are subject to the EPI. The revision is expected to lead to an increase of some 650,000 workers participating in the pension program.

The package also modified the EPI earnings test to increase the monthly income threshold for those aged 60 to 64. Currently, EPI pensions are reduced if a pensioner’s monthly combined earnings and pension income exceeds the monthly threshold set by the government. In 2022, this threshold will increase from 280,000 yen (US$2,599.15) to 470,000 yen (US$4,362.86), which will match the existing threshold for those aged 65 and older.

Additionally, the government will increase the maximum age for deferring pension benefits to allow people to choose between the ages of 60 and 75 to begin receiving pensions, raising the upper limit from age 70. As each month of deferral increases pensions by 0.7 percent, this reform allows pensions to be increased up to 84 percent (compared with 42 percent previously).

Summary Sources

Jiji Press English News Service, “Japan Adopts Pension System Reform Plan.” The Japan Times. March 03, 2020. Accessed 04/16/2020.

Nippon Communications Foundation. “Japan Lower House Starts Talks on Pension Reform Bills.” April 14, 2020. Accessed 04/16/2020.

Press English News Service. “Government OKs hiking optional pension age to 71.” The Japan Times. February 17, 2018. Accessed 09/24/2019.

Jiji Press English News Service. “Japan’s Corporate Pension, Insurance Schemes to Cover More Part-Timers.” The Japan Times. August 6, 2018. Accessed 09/24/2019.

Danforth, Ben, John Jankowski, and David Rajnes. “International Update, June 2020.” Social Security Administration. June 2020. Accessed 06/29/2021.

Thomas Wilson. “Japan, short of workers, eyes hiking optional pension age beyond 70.” Reuters. February 16, 2018. Accessed 09/24/2019.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 3/30/22

New Zealand’s retirement income system scored 68.8 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. New Zealand’s retirement income system is comprised of a National Pension System at the national level, the Employees’ Pension Insurance (EPI) at the occupational level, and other private products at the individual level.

National Level

The New Zealand Superannuation is a pay-as-you-go program funded fully by general revenues. Eligibility remains almost universal through a residency test; prior to 2021, an individual was required to reside continuously in the country for 10 years from age 20, with five of those years being after age 50, and be a resident on the date of application. Recent reform is set to gradually increase this requirement by a year every two fiscal years, with the goal of setting it at 20 years by 2042. Benefits are provided as a lifetime annuity and are flat despite differing levels of earnings during working life, with benefit levels being adjusted for two-person and one-person households. Individuals are eligible to receive the pension at age 65. Benefits may be taken as a lump sum or a lifetime annuities option. Withdrawals in retirement are tax-free.

Occupational Level

The KiwiSaver program was introduced in 2007 to increase savings among workers. Participation is voluntary, but its auto enrollment feature requires that a worker must opt out of the program. A one-time $1,000 tax-free government contribution is available to those who joined the program before May 21, 2015. To encourage saving, the government also makes an annual contribution (maximum NZ $521.43) to eligible members. Every seven years, the Government reviews the KiwiSaver default fund providers before selecting default providers through a competitive process. Once an account is created, it is portable among employers and requires contributions from both employers and employees. While contribution and investment options are available to workers, these are limited to prevent information overload. Therefore, employee contribution can be made at 3%, 4%, 6%, 8%, or 10% of their annual income and only several dozen funds are available to invest in. Employers are required to contribute at least 3% of a worker’s annual income, but are free to contribute at a higher rate. Early withdrawals are highly restricted before the retirement age of 65, but employees may be able to make early withdrawals of part (or all) of their savings if they are buying a first home, moving overseas permanently, suffering significant financial hardship, or seriously ill. Having a KiwiSaver account doesn’t affect a person’s eligibility for NZ super or reduce the amount they will be entitled to.

Individual Level

Other private products for retirement savings exist in New Zealand. These vary drastically depending on the product that is chosen. However, tax incentives for contributing to such products were removed in the 1980s.

Summary Sources

Guest, Ross. “Comparison of the New Zealand and Australian Retirement Income Systems.” Background paper prepared for the 2013 review of the retirement income policy by the Commission for Financial Literacy and Retirement Income. February 2013. Accessed 03/24/2020.

Harris, Richard. “Why New Zealand’s Retirement System Works So Well.” NextAvenue. July 25, 2014. Accessed 03/24/2020.

New Zealand Government. KiwiSaver. Accessed 03/24/2020.

OECD. “Pensions at Glance 2019.” November 27, 2019. Accessed 03/24/2020

Social Security Administration. “International Update, December 2021.” December 2021. Accessed March 30, 2022.

Current Issues

On March 1, 2020, the Ministers of Finance and Commerce and Consumer Affairs announced several changes that the government intend to improve the KiwiSaver default funds, including changing the investment mandate from ‘conservative’ to a ‘balanced’ fund, prohibiting default funds from investing in fossil fuels, and requiring default providers to maintain a responsible investment policy published on their website. The government will ensure KiwiSaver fees are simple and transparent, and members can make informed decisions about their retirement savings. Additionally, it will transfer non-active default members to any provider that is not reappointed as one of the new default providers. These new terms will apply to the default funds and new providers that are in place starting December 1, 2021.

During COVID-19, to alleviate the economic burden from the pandemic and encourage increased spending, New Zealand doubled the winter energy payment to people receiving a Main Benefit or New Zealand Superannuation. The winter energy payment began in 2017 in order to help support older New Zealanders and low income families. Because of the pandemic, people spent more time at home during the winter and incurred higher heating costs, which the government offset with the increased payments.

In November 2021, the government passed the New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill. The new law will gradually increase the residency requirement for the country’s universal New Zealand Super from 10 to 20 years. Specifically, the required years of residency since age 20 will increase to 11 years on July 1, 2024, and then 1 year every 2 years thereafter until reaching 20 years on July 1, 2042. The new law does not change other residency rules, including that at least 5 years of the residency be since age 50. This law aims to reduce access to the government financed New Zealand Super among individuals who have spent a significant portion of their working-age lives outside of New Zealand. This change will bring New Zealand closer in line with other OECD countries, whose resident requirement for old-age programs averages at 27.5 years.

Summary Sources

Dickinson, Priscilla. “KiwiSaver default provider change: What it means for you.” Newshub. May 18, 2021. Accessed 07/27/2021.

“The Mercer CFA Institute Global Pension Index 2020.” The Mercer. 2020. Accessed 06/22/2021.

“New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill.” Introduced Oct. 18, 2018. Accessed 06/22/2021.

Sepuloni, Hon Carmel. “Supporting New Zealanders Through Winter Months.” New Zealand Government. April 30, 2021. Accessed 07/27/2021.

Social Security Administration. “International Update, December 2021.” December 2021. Accessed March 30, 2022.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 3/30/22

Singapore’s retirement income system scored 74.1 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Singapore’s retirement income system is comprised of the Central Provident Fund (CPF) at the national level, the Supplementary Retirement Scheme (SRS) at the occupational level, and other private products and plans at the individual level.

National Level

The Central Provident Fund (CPF) is a fully funded system serving as the primary source of retirement income in Singapore. It is a defined contribution plan. Employees making at least S$500 a month and their employers are required to contribute up to 20% and up to 17% percent, respectively, of the employee’s salary to the fund, depending on the employee’s salary and age (lower contribution rate for older employees). The maximum annual combined employee and employer contribution is S$37,740. Contributions are tax-exempt and are split between two retirement accounts (Ordinary and Special) and a medical expenses account (Medisave), with the vast majority going toward the Ordinary account. The normal pension age is 55 for lifetime benefits. Pension payouts last for 20 years with no guaranteed payouts beyond then.

Funds from the Ordinary account and Special account are transferred to the Retirement account at age 55. Members with at least S$60,000 in the Retirement account at age 65 are automatically enrolled in a life annuity program from the CPF Lifelong Income for the Elderly (CPF LIFE). Enrollment is voluntary for fund members with less than this amount. The CPF LIFE provides lifetime income with reduced risk due to a government minimum interest guarantee, but benefits depend on investment performance. Early withdrawals are permissible for approved activities such as housing and education, and life annuity payments are not deferrable. If an individual has a balance above the minimum sum (S$171,000 in 2018), the excess amount may be withdrawn in a lump sum beginning at age 55. In 2017, the CPF Board begin offering the CPF Retirement Planning Service to all CPF members who turn 54. Members will receive one-on-one sessions to help them understand the CPF schemes and available options.

As of January 2018, CPF members can choose to receive escalating payouts under the CPF Life national annuity scheme. The current options — CPF Life Standard and Basic plans — pay fixed monthly amounts for life. This new scheme, where payouts will grow 2% larger every year, was unveiled to address the concerns of rising living costs. CPF members who are already on Standard or Basic plans had one year from January 2018 to switch to the new plan if they wished to. Members opting for the escalating plan will see monthly payouts about 20% lower compared to those under the fixed plans at the start. Those wanting higher initial payouts can either top up their CPF Life premiums or delay the payout up to age 70.

Occupational Level

The Supplementary Retirement Scheme (SRS) is a voluntary savings program that creates a private individual account. Eligible members are not restricted to Singaporean residents — foreigners are eligible to open accounts as well. Contributions are voluntary for both employers and employees. Funds in this account may be used to invest in a variety of investment and financial products, but all proceeds must be returned to the SRS account. Contributions can be made by consumers’ discretion up to a cap and are tax-exempt, and only half of the withdrawals during retirement are taxable. Withdrawals of any amount are allowed beginning at age 62. Members have the flexibility to withdraw their SRS funds in cash or investments. Early withdrawals are subject to regular taxation in addition to a 5% premature withdrawal penalty.

In July 2015, SRS members began to apply to their SRS operators to withdraw investments from their SRS accounts without having to liquidate their investments. On January 1, 2016, the annual SRS contribution cap increased to $15,300 for Singaporeans and Permanent Residents, and $35,700 for foreigners.

Individual Level

In addition, there are other private accounts that Singaporeans can use. A Section 5 Plan can be created by companies registered in the country and only accepts employer contributions. An offshore trust fund can be established by any company and accepts contributions from both employers and employees. Taxation benefits vary depending on the plan, and contributions and withdrawals may or may not be subject to taxation.

Summary Sources

Central Provident Fund Board. “CPF Life.” Accessed 04/14/2020.

OECD. “Pensions at a Glance Asia/Pacific 2018.” December 3, 2018. Accessed 04/14/2020.

POSB. “Supplementary Retirement Scheme.” Accessed 04/14/2020.

Singapore Ministry of Finance. “Supplementary Retirement Scheme (SRS).” Accessed 04/14/2020.

Tan, Lorna. “CPF Life escalating plan available from next January.” Straits Times. March 7, 2017. Accessed 04/14/2020.

Current Issues

Starting January 1, 2022, Singapore will increase the Central Provident Fund (CPF) contribution rates for employees aged 55 to 70 years old. Originally, this increase was set for January 2021 but was delayed to help alleviate financial burdens due to the COVID-19 pandemic. Ranging from a 1.5-2 percentage point increase, these initial contribution reforms mark the beginning of Singapore’s goals of increasing contribution rates gradually over the next decade to secure and bolster their retirement capacity and support for older work employment.

In addition to raising the contribution rates, Singapore aims to increase the retirement age from 62 to 63 by July 2022, and 65 by 2030, and increase the re-employment age from 67 to 68 by 2022, and to 70 by 2030. In July 2020, the government also passed the S$1.3 billion Senior Worker Support Package to incentivize companies to raise their internal retirement age by funding a portion of senior workers’ salaries. Both measures are focused on encouraging employees to remain in the workforce for longer as Singapore’s population ages.

Summary Sources

Mokhtar, Faris. “Retirement and re-employment ages to be raised by 3 years, CPF contribution rates for older workers to go up.” Today. Updated August 27, 2019. Accessed 10/4/2019.

Medina, Ayman Falak. “Singapore to Increase Central Provident Fund Contributions From 2022.” Asean Briefing. June 29, 2021. Accessed 06/29/2021.

“Singapore Government and Institution Measures in Response to COVID-19.” KPMG. Last updated September 9, 2020. Accessed 06/29/2021.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 3/30/22

The Swiss retirement income system scored 72.3 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. The Swiss retirement income system is comprised of an Old Age and Survivors’ Insurance at the national level, mandatory pensions at the occupational level, and private products at the individual level. Concerning last year, the Swiss index value increased by 2.3. For 2021 was 70.0.

National Level

The Old Age and Survivors’ Insurance (OASI) program was established in 1948 with the objective of covering the basic needs of retirees. It is financed mainly by a pay-as-you-go system, although it is also partially subsidized through federal and value-added taxes, as well as taxes on tobacco, alcohol, and gambling casinos. A resident is eligible for this program as soon as he/she has contributed to it for at least one full year. Participation is mandatory, including for those who are self-employed (contribution rate is from 4.35% to 8.1% of their gross income) and those without employment (contribution is from CHF 496 to CHF 24,800, depending on means and other factors). The contribution rate for general working individuals is 8.7% of annual income, split evenly between employer and employee at 4.35% each. Individual accounts are maintained for each person who contributes to the OASI fund and are used to determine the amount of the final pension. The retirement age for males is 65 and 64 for females.

If an employee is not a Swiss citizen, a minimum of 10 years of contributions and continued residence in Switzerland after retirement is required, unless there is a reciprocal Social Security agreement in effect.

The Federal Council adjusts pension levels every two years according to mean salary and price index or earlier if annual inflation exceeds 4%. As of January 1, 2019, the monthly OASI pension will range from CHF1185 to 2370. Married couples receive two separate, individual pensions; however, the combined amount may not exceed 150 percent of the maximum pension level. Early and delayed retirement is available, with reduced and increased benefits applied, respectively. Early retirement is possible at age 63 for men and 62 for women. In cases of early pension benefit withdrawal, the full benefit value is reduced by 6.8% for each year of early withdrawal.

Occupational Level

The Mandatory Occupational Pension program requires all employers to establish pension plans. The occupational pension works in conjunction with OASI, providing at least 60% of the retiree’s final income. The occupational level insurance is only obligatory for salaried workers with annual income of at least CHF21,330 from 2019, although it is available but voluntary to self-employed workers. Employees’ contribution changes incrementally by age: 3.5% from age 25 to 34, 5% from age 35 to 44, 7.5% from age 45 to 54, and 9% from age 55 to retirement. Employers must contribute at least equally to the sum of employee contributions, and may voluntarily cover part of their employees’ contributions. Exceptions to the mandatory occupational pension program offering are: (1) fixed-term employment contracts up to three months, (2) exclusively secondary employment where primary employment is already insured or person is self-employed, and (3) disability of 70% or more.

Employer benefit plans can be created by the government, private firms, professional associations, or unions. Workers are entitled to all available retirement assets when changing jobs. Early withdrawals can be made for special purposes like purchasing a home. Early retirement in the occupational program is possible and can begin at age 58. The minimum interest rate on the retirement assets is 1% (2020). The minimum conversion rate for both men and women is 6.8%. In the case of early or deferred retirement, the conversion rate will be adjusted commensurately.

Individual Level

There are two different types of private pension plans.

Restricted private pension plans are for those earning an income. Contributions are tax- deductible up to a maximum amount set by the Federal Social Insurance Office each year. As of 2019, those who already have occupational pension plans can pay up to CHF6,826 and those without preexisting plans (largely the self-employed) can pay up to 20% of their income, although the cap is set at CHF34,128. Workers cannot withdraw their savings freely.

Unrestricted pension plans are available to everyone. There is no limit on contributions, and these offer fewer tax advantages compared to the restricted plan.

Summary Sources

Federal Social Insurance Office, Switzerland. “Meaning and objectives of occupational pension funds.” Updated September 16, 2019. Accessed 04/23/2020.

Federal Social Insurance Office, Switzerland. “OASI Benefits and Financing.” Updated May 9, 2019. Accessed 04/23/2020.

Federal Social Insurance Office, Switzerland. “Purpose of old age and survivors’ insurance.” Updated December 22, 2014. Accessed 04/23/2020.

Federal Social Insurance Office, Switzerland. “Switzerland’s old-age insurance system.” Updated January 16, 2020. Accessed 04/16/2020

OECD. “Pensions at a Glance 2019.” November 27, 2019. Accessed 04/23/2020.

The Swiss Authorities Online. “The 3rd pillar – private pension plans.” Accessed 04/23/2020.

Social Security Administration. “Social Security Programs throughout the World: Europe, 2018 (Switzerland).” September 2018. Accessed 04/23/2020.

Current Issues

Although debated throughout the past decade, Switzerland has been unable to pass major pension reforms, until late 2021. In Spring 2021, the Swiss Senate voted to approve the AHV (old age and survivors’ insurance) reform, which includes increasing the retirement age of women from 64 to 65 (making the retirement age for women the same as for men), allowing for more flexible pension withdrawal, and increasing the VAT to contribute to pension financing. It is expected that these measures will save CHF10 billion between 2023 and 2031. After passing through the Swiss Senate, the bill faced strong opposition from lawmakers and those affected alike, but it also garnered some support and even inspired the calls for a referendum that would increase the retirement age even higher to 66 by 2032. In December 2021, the bill passed the lower house of parliament and was enacted into law. The provisions of the bill have not yet been implemented, while some changes are expected to occur in mid-2022, the new law will have to be subject to a popular ballot due to its provision regarding VAT, it remains unclear when a referendum might occur.

Summary Sources

Brotschi, Markus. “The battle over major pension reform.” Swiss Community. May 19, 2017. Accessed 07/01/2021.

Koltrowitz, Silke. “‘Revolt of the young’: Swiss to vote on reform of pension system.” Reuters. July 16, 2021. Accessed 07/22/2021.

Kunz, Markus. “AHV 21 reform: The most important changes compared with today.” Credit Suisse. March 15, 2022. Accessed 04/01/2022.

“Pension reform in Switzerland: a democratic balancing act.” SWI. April 15, 2021. Accessed 07/01/2021.

“Swiss parliament votes to raise retirement age for women.” Le News. June 11, 2021. ccessed 04/01/2022.

“Switzerland mulls raising the retirement age for women.” SWI. March 19, 2021. Accessed 07/01/2021.

“Switzerland increases the retirement age for women to 65.” The Limited Times. June 9, 2021. Accessed 07/01/2021.

“Unions decry ‘lack of respect’ for women in labour market.” SWI. June 7, 2021. Accessed 07/01/2021.

Weisser, Veronica. “Reforms for all three Swiss pension pillars.” UBS. January 28, 2021. Accessed 07/01/2021.

“Women speak out in favour of raising retirement age for Swiss women.” Le News. December 24, 2021. Accessed 04/01/2022.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 4/1/22

The Dutch retirement income system received a score of 83.5 on the 2021 Mercer CFA Institute Global Pension Index, earning it a grade of A and deeming it a first class and robust retirement income system that delivers good benefits, is sustainable, and has a high level of integrity. It is based on three classifications: the State Pension (AOW) at the national level, collective pension plans at the occupational level, and private products at the individual level.

National Level

See ‘Current Issues’ section below for the latest reform proposals, some of which took were effective beginning January 2022.

The Algemene Ouderdoms Wet (AOW) Savings Fund is a compulsory pay-as-you-go system and is financed by payroll tax revenues. The AOW covers residents and people working in the Netherlands. Participants contribute 17.9% of their income. The AOW pension age will remain 66 and 4 months from until 2021 and will rise gradually to age 67 from 2022 to 2024. The state pension is guaranteed to rise with inflation until 2028. Only those who have lived in the Netherlands for 50 years preceding the normal retirement age are eligible to receive the full old-age pension. A partial pension is available for workers who don’t continuously live or work in the Netherlands for 50 years.

The retirement benefit is linked to statutory minimum wage. Couples also each receive 50% of the minimum wage while singles receive 70%. For every year one has not lived in the Netherlands and every year one has not worked before the retirement age, the pension benefit is deducted by 2%. This benefit is available when a person reaches 66 years old (gradually rising to 67 and three months by 2022), so early retirement must be funded through personal savings. Each additional early retirement year will reduce an individual’s benefit by 6.5%. Each year of deferred retirement will increase an individual’s benefit by 6.5%. In an effort to encourage people to work longer, the government is also offering a mobility bonus to employers for employing elderly workers.

Occupational Level

Collective pensions make up another level of the retirement system. There are three types of plans:

(1) Industry-wide funds are available to workers in a particular industry and are portable within an industry (i.e., construction or hotel and catering sector).

(2) Employer funds are provided voluntarily by an individual company to its workers (i.e., Royal Dutch-Shell Pension Fund).

(3) Independent professional funds are set up voluntarily by individual professionals (i.e., dentists).

Each fund is created by or for the respective category of workers — for example, teachers or a company for its workers — and managed by an independent organization that is formed separately from the company; this allows the plan’s protection should the company fail. Characteristics and funding of each plan are different depending on a fund’s board of trustees. These are quasi-mandatory plans because once a group (or company) decides to provide a pension plan, the entire sector or profession is required to participate. Eighty percent of occupational-level pensions are mandatory sector-wide pension funds. Employees can opt out of a sector-wide pension if their company establishes a company pension plan that provides at least comparable benefits.

Most occupational pensions are defined benefit (DB), although defined contribution (DC) and hybrid schemes are growing in popularity. For DC plans, employers make about two-thirds of the overall contribution and employees the remaining one-third. For DB plans, employees pay a percentage of their salaries (usually 4 to 8%), and the employer contributes as well.

Although there is no statutory obligation for an employer to offer a pension, more than 95% of employees are covered by one. As of January 1, 2018, the target retirement age (TRA) for occupational retirement plans in the Netherlands increased from 67 to 68, triggered automatically by an increase in the average life expectancy.

Individual Level

Lastly, individuals have access to a variety of private retirement income products. These include many accounts and savings products that enjoy high tax subsidies if the combined value of all pension benefits does not guarantee a replacement rate of 70%. Individual pensions can include annuities, endowments, life insurance, and fiscal old-age reserves for entrepreneurs.

Self-employed people are not linked to an employer and cannot participate in a supplementary pension scheme. In many cases, they must ensure that their AOW state pensions are supplemented by individual pension provisions. Self-employed people can also add a percentage of their company’s profits to the special tax allowance on an annual basis. The tax authorities will take that amount into account in the tax return and tax payment over that amount will be deferred.

Summary Sources

Dutch Ministry of Social Affairs and Employment. “The old age pension system in the Netherlands.” Accessed 01/21/2021.

Government of the Netherlands. “Q+A Supplementary Pensions.” Updated 12/22/2011. Accessed 01/21/2021.

H. Smorenberg. “The Stress Behind the Dykes: Debating the Next Generation of Retirement Policy Reforms in the Netherlands.” Georgetown University Center for Retirement Initiatives. September 2018. Accessed 01/21/2021.

Social Security Administration. “International Update, July 2019.” July 2019. Accessed 01/21/2021.

Social Security Administration. “Social Security Programs throughout the World: Europe, 2018 (Netherlands).” September 2018. Accessed 01/21/2021.

SVB. “AOW Home.” Accessed 01/21/2021.

Current Issues

Reforming the pension system has been a topic of constant debate in the Netherlands in recent years. In June 2020, the government published a proposed outline of reforms. Then, in January 2021, the government released a pensions reform bill, but after receiving criticism for some of the bill’s provisions, they postponed their initial timeline of reform roll-out. In March 2022, the government finally introduced the reform bill in the Dutch House of Representatives, and the bill needs to pass both houses, but it is expected to do so easily due to the long period of negotiations and consultations.

Changes to the national level system include the state national pension (AOW) retirement age gradually increasing to 67 between 2022 and 2024 from the current 66 years and four months based on longer life expectancy. In addition, there will no longer be a penalty associated with early retirement, allowing employees and employers to make agreements to retire up to three years early. These particular provisions were introduced in separate legislation, successfully passed with implementation starting January 2022.

Proposed changes to the occupational level system include no longer varying the value of the annual pension accrual based on a member’s age. The government also plans to slowly transition to a DC plan dominated landscape; all current DC plans will continue, and for those who only possess a DB plan, a new DC one will be set up, and DB plans will not be an option going forward. It is unclear what will happen with existing DB plans going forward. There will be flat contribution rates in both DC and DB plans.

Moreover, the government is planning to introduce a new ‘solidarity contribution scheme’, along with implementing reforms to the existing AOW and current collective occupational pensions. It is characterized by a collective investment policy for at least the excess returns for active, former, and future participants in the scheme. Accrual takes place by way of an individual pension capital that is combined with the benefits of collective risk-sharing (e.g. through spreading of financial ups and downs and a solidarity reserve). Current employees must be compensated separately by their employers for any decrease in their pension accrual values. This will increase employer costs, estimated at two- to three- times the current annual pension contribution. To offset this cost; suggestions for financing this transition include a temporary increase in contributions, temporary financial buffers, a lump sum from the employer in the solidarity reserve, etc.

In addition, a new type of pension design will be introduced for non-insured occupational pension plans, which will not offer benefit guarantees nor require funding buffers. Under these new designs, pension benefits will increase immediately if the year-end funding coverage ratio is above 100% and decrease if ratio falls below 100%.

Due to the delay in introducing the legislation, Minister of Social Affairs and Employment Wouter Koolmees announced that the reforms’ implementation date would be pushed back by a year to January 1, 2023; this will shift the transition period to end January 1, 2027. The government’s shift from DB plans to DC plans, including collective DC plans, will mark a big departure from the current system and require vast technological and administrative changes.

Summary Sources

Boelhouwer, Johanne. “Major reform of the Dutch Pension system.” JDSUPRA. April 5, 2022. Accessed 04/06/2022.

Eikelboom, Willem and Wichert Hoekert. “Netherlands: Draft pension legislation released for consultation.” December 30, 2020. Willis Towers Watson. Last Accessed 07/06/2021.

Eikelboom, Willem and Wichert Hoekert. “Netherlands: Pension reforms postponed for up to one year.” Willis Towers Watson. May 27, 2021. Last Accessed 07/06/2021.

Hintze, John. “The Changing Face of Dutch Pensions.” BNY Mellon. September 23, 2021. Accessed 04/06/2022.

Lockton Global Compliance, “Netherlands releases pension reform framework [Updated].” January 8, 2021. Accessed 04/04/2020.

Mercer. “Netherlands’ proposed pension reforms move forward.” August 24, 2020. Accessed 01/21/2020.

“The new pension reform.” De Nederlandsche Bank. Accessed 04/06/2022.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 4/6/22

The UK retirement income received a score of 71.6 on the 2021 Mercer CFA Institute Global Pension Index, earning it a grade of B and deeming it a system that has a sound structure, with many good features but some areas for improvement. It is based on a number of tiers:

• State pension programs
• Second state pension
• National Employment Savings Trust (NEST)
• Private savings opportunities

State Pension Programs

State Pension programs include the Basic State Pension (gradually replaced by a new State Pension) and means-tested benefits.

• The Basic State Pension (BSP) is a pay-as-you-go system. Only men born before April 6, 1951, and women born before April 6, 1953, are eligible for BSP. UK citizens born on or after those dates are eligible for the new State Pension (see below). The maximum weekly benefit for the new State Pension is £129.20 with a complete contribution record. The State Pension age is currently 66 for both men and women and will increase incrementally to 67 by April 2028. The State Pension age is the earliest to claim the Basic State Pension. To get the full new State Pension, an individual must have paid into National Insurance contributions or credit for 30 qualifying years. A worker usually needs at least 10 qualifying years on a National Insurance record to get any State Pension. For those who lack sufficient contribution years, it will be possible to pay voluntary contributions to buy more qualifying credit years. Deferral options include an enhanced pension or a taxable lump sum with a non-enhanced pension. The basic State Pension increases every year by whichever is the highest of the following: the average percentage growth in wages (in Great Britain), the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI) or 2.5%.
• The New State Pension (also referred to as the single-tier pension) is in effect for anyone who reaches State Pension age on or after April 6, 2016. The eligible retirement age is the same as the State Pension age. Benefits are based on the number of contributions made before reaching retirement. The maximum weekly benefit for the new State Pension is £177.10 (2021/2022) with a complete contribution record. To get the full new State Pension, an individual must have paid into National Insurance contributions or credit for 30 qualifying years and usually needs at least 10 qualifying years on a National Insurance record to get any State Pension. The full weekly rate for a pension based on a late spouse’s or civil partner’s National Insurance contributions is £129.20 and £77.45 for a current spouse’s or civil partner’s National Insurance contributions. The full weekly rate for a non-contributory pension is £77.45. Should someone decide to defer his or her pension, benefits will increase by 5.8%, and lump sum payments will not be available.
• The Pension Credit is a means-tested benefit comprising the Guarantee Credit and the Savings Credit. The Guarantee Credit, paid to those who reach State Pension age, guarantees a minimum weekly income of £177.10 for single people and £270.30 for couples. The Savings Credit is available to retirees who made some private retirement savings. This credit provides a maximum weekly benefit of £14.04 for single people and £15.71 for couples. Under the Pensions Bill 2013, the Savings Credit is abolished for anyone who reaches State Pension age after April 6, 2016.

Summary Sources

AgeUK. “Factsheet: State Pension.” April 2019. Accessed 03/31/2020.

AgeUK. “NEST: all you need to know.” Accessed 03/31/2020.

AgeUK. “What the Budget Means for You.” March 2018. Accessed 03/31/2020.

GovUK. “Pension Credit.” Accessed 03/31/2020.

GovUK. “The Basic State Pension.” Accessed 03/31/2020.

National Employment Savings Trust. “Auto enrolment.” Accessed 03/31/2020.

National Employment Savings Trust. “Contributions”  Accessed 03/31/2020.

National Employment Savings Trust. “Taking your money out of NEST.” Accessed 03/31/2020.

OECD. “Pensions at a Glance 2021: Country Profiles – United Kingdom.” December 8, 2021. Accessed 04/06/2022.

Current Issues

In November 2021, the government opened for consultations proposed changes to the regulatory charge cap that applies to the default funds of occupational DC pension schemes used for automatic enrolment, also known as NEST. The goal of these consultations was to inform the government about how they can help DC schemes access illiquid assets that have potential positive outcomes for plan members, while ensuring that they remain protected from high fees and undue risk. Previous consultations have found that the charge cap can sometimes prevent trustees from exploring potentially advantageous investment strategies in fear that they may incur fees that would breach the cap, and that many stakeholders and trustees were in favor of providing flexibility in the charge cap when it came to fluctuating performance fees.

The government is now seeking consultations on their proposal to remove performance fees from the charge cap. The current cap is set at 0.75% of the assets in a member’s account. Some charges, like transaction costs, are already excluded from the charge cap, and smoothing is already allowed for performance fees within the charge cap.

The consultation period closed on January 19, 2022. While the government has reported that they’ve received a mixture of responses, they have been overly positive and the government is planning ahead on implementing the change. The report following the results of the consultations is yet to be released.

Summary Sources

“Consultation on enabling investment in productive finance.” Department for Work and Pensions, UK Government. Updated March 30, 2022. Accessed 04/06/2022.

Cumbo, Josephine. “UK to push ahead with reform to pension charges despite backlash.” The Financial Times. March 29, 2022. Accessed 04/06/2022.

“Reforming the DC charge cap – DWP consults.” Simmons-Simmons. December 2, 2021. Accessed 04/06/2022.

Current Issues

According to a 2019 “How the UK Saves” report released by the NEST Insight Unit in conjunction with Vanguard auto-enrollment is succeeding in giving more members the ability to save for their retirement. The numbers are suggesting a positive result. NEST is serving nearly 8 million members from more than 800,000 employers. About 9 in 10 workers at medium and large companies are now contributing to a retirement plan through NEST, and the participation rates jumped 37% after auto-enrollment was implemented. Smaller employers saw a 44% increase, with around 70% workers currently enrolled in a plan.

In addition, the NEST Insight Unit started exploring future program reforms to address challenges which include increasing participant engagement, exploring the best retirement income products to meet participant needs, diversifying investment approaches, targeting overall financial well-being of savers, and considering ways to reach workers in nontraditional jobs. Due in part to these challenges, the NEST Insight Unit launched a research trial at the end of 2018 testing a “sidecar savings model,” which allow savers access to a liquid account for emergencies. This tool allows users to build up emerging savings and then once a savings target has been reached to set more aside for retirement. The initial phase of the trial, having been completed by January 2021, found that 6 in 10 employees think the savings tool could be helpful, which increased to 8 in 10 employees of those struggling financially. Even though the tool allows for users to “set and forget,” users continued to actively use their accounts and adjust the amount they are saving. Despite withdrawals from the accounts over the trial period, savings on average continued to rise, which suggests that the tool could be helpful in reaching users’ target savings and then increase contributions to workplace pension plans.

During the Pandemic, NEST also found that users did not significantly change their voluntary retirement savings behaviors. There was a slight increase in the percentage of people choosing to opt-out of retirement plans (from 10% at the end of 2019 to 12-13% in 2020), but has since returned to normal rates in 2021.

Summary Sources

Anticipating Some Challenges Will Strengthen the Foundation for Continued Success.” Georgetown University Center for Retirement Initiatives. November 2018. Accessed 10/30/19.

“The Mercer CFA Institute Global Pension Index 2020.” The Mercer. 2020. Accessed 06/22/2021.

NEST Insight. “Auto enrolment remains resilient through pension contribution rise and global crisis.” February 10, 2021. Accessed 07/27/2021.

NEST Insight. “​​Encouraging early indications from sidecar trial show financially ‘struggling’ and ‘squeezed’ brought into saving.” July 8, 2021. Accessed 07/27/2021.

NEST Insight. “The UK pension reforms (1997-2015)” Accessed 03/31/2020

NEST Insight. “Pension Reforms in the UK: In conversation with Nick Pearce and Will Sandbrook.” Accessed 03/31/20.

NEST Insight. “Liquidity and workplace pensions.” Accessed 10/30/19.

“Policy Responses to COVID-19.” International Monetary Fund. Last updated June 10, 2021. Accessed 06/22/2021.

Will Sandbrook. “The Next Generation of NEST Program Reforms in the UK:

“United Kingdom Government and Institution Measures in Response to COVID-19.” KPMG. Last updated September 9, 2020. Accessed 06/22/2021.

Vanguard & NEST Insights. “How the UK Saves 2019.” 2019. Accessed 10/18/2019.

Source: Georgetown University’s Center for Retirement Initiatives

Last Updated 4/6/22