Canada’s retirement income system maintained its B grade in the 2014 edition of the Melbourne Mercer Global Pension Index (MMGPI), reinforcing its position as one of the leading retirement income systems in the world.
Now in its sixth year, the MMGPI measured 25 retirement income systems against more than 50 indicators under the sub-indexes of adequacy, sustainability and integrity. While Canada’s ranking fell from sixth to seventh after the addition of five new countries, Canada’s overall score in the index increased slightly from 67.9 to 69.1.
“Canada’s retirement system continues to be one of the strongest retirement systems in the world by providing a combination of universal pensions, income-tested employer pensions, individual RRSPs and individual TFSAs, although there is always room for continued improvement,” according to Scott Clausen, a partner in Mercer’s retirement business in Toronto.
Denmark continued to retain the top position in 2014 with an overall score of 82.4. Denmark’s well-funded pension system with its good coverage, high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations are the primary reasons for its top spot.
How can Canada’s retirement savings system improve?
According to the MMGPI, the overall score for the Canadian system could be increased by doing the following:
- increasing the coverage of employees in occupational pension schemes through the development of an attractive product for those without an employer-sponsored scheme;
- increasing the level of household savings for middle-income earners; and
- increasing the labour force participation rate among older workers.
“The retirement income of Canadians could also be improved by a reduction in the level of investment management fees charged under capital accumulation plans,” he adds.
Certain provinces are in the process of taking action to implement some of these measures, including Quebec with the introduction of voluntary retirement savings plans and Ontario with the announced introduction of an Ontario Retirement Pension Plan. In both provinces, these plans are aimed at increasing retirement savings for employees without an occupational pension plan.
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