Which countries have the best retirement schemes?

by Krantcents · 25 comments

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Many of you probably pay into a 401(k) plan, which of course is a retirement scheme that helps you invest your money wisely for old age. Experts suggest that no country’s pension system is clearly superior to another’s, although some are slightly better in terms of the benefits they deliver.

In the case of the USA, economists view the retirement benefits as less generous perhaps than those offered in countries in Europe, for example, although the gap is closing as the age of retirement increases and those governments seek to adjust their systems. Here are a few countries whose systems are different from the USA’s and which offer a different perspective on securing a financial future for retirement:

The Netherlands focuses on healthcare

The Netherlands is generally recognised as providing one of the world’s best pension schemes, particularly with regards to health care, of which high-quality, modern technology and comprehensive coverage are a part of the package. The retirement income consists of a “quasi-mandatory earnings-related occupational pension linked to industrial agreements” (according to researchers at Boston College).

For transparency, opt for Australia’s defined-contributions system

This is a three-pronged pension system that consists of income-based pension benefits, funded from general tax revenues, mandated contributions by the employer to a defined pension plan and voluntary contributions by the employee. Two features of Australia’s scheme are notable: one, it’s a defined contribution system rather than a defined benefit plan (in contrast to the US system) and secondly, the retirement age is increasing from 65 in 2017 to 67 by 2023, which should offer additional security to retirees.

Not a fan of pensions? The UAE provides end-of-service gratuity only

Although the UAE is in the process of instituting a pension scheme for employees, it offers end-of-service gratuity at the moment, which consists of 21 days’ wages for each year of service for the first five years and 30 days’ wages for each additional year beyond five years on the condition that the total gratuity doesn’t exceed the aggregate of two years’ wages. Many employees choose to deposit a small amount each month into their bank accounts  in the UAE in the method of a traditional pension scheme.

United Kingdom rolls out a new private pension system

Also in the process of revising its national pension scheme, the UK requires employers to automatically enrol eligible employees in a retirement account and provide a minimum contribution over the next three years. This is the National Employment Savings Trust (NEST), which will initially require a minimum of 2 per cent employee earnings with at least 1 per cent contributed from the employer. The contribution ratio will increase to 8:3 per cent by 2018, with an annual contribution limit of £4,400.

In general, investing in a pension is the securest way to protect your finances for retirement. Experts caution, however, that public pensions around the world are being scaled back and that as a failsafe, it’s wise to put funds away voluntarily as well.

Photo by:  Uggboy

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Bobby @ Ban Excuses April 21, 2013 at 3:13 am

I think the main problem is with how people save their money. As you mentioned, it is wise to put money away on your own. The Government seems to be good at manipulating figures to make things look better on paper than they actually are.

Krantcents April 21, 2013 at 7:46 am

I believe that you should always do what you can to take care of yourself. Then you can use whatever programs are available to enhance your own savings.

Sambuca April 21, 2013 at 4:45 am

Don’t cry for the UAE, as told in their local English-language newspaper The National, ‘Many will accept a job only if it is “prestigious”, and routinely reject jobs with salaries up to Dh15,000 ($4,087) a month’ (original article: http://www.thenational.ae/news/uae-news/call-for-three-strikes-and-out-on-uae-benefits-for-jobless-who-reject-work)…

Krantcents April 21, 2013 at 7:48 am

Altough the salaries seem rich, I imagine the cost of living is higher too.

Brick By Brick Investing | Marvin April 21, 2013 at 5:07 am

I agree with Bobby, the world consists of spenders and not savers. Governments should not be responsible for ensuring pensions for its citizens. I believe this grants access for too much foul play/manipulation.

Krantcents April 21, 2013 at 7:52 am

I think the best scheme is your personal efforts, but you can use what is offered to supplement your own efforts.

My Financial Independence Journey April 21, 2013 at 5:11 am

I prefer to have my money in private accounts. I don’t trust the government or pensions to manage my money, since both have an abysmal record of money management and staying solvent. I’ve read far too many stories of pensions being underfunded to be comfortable with them.

Krantcents April 21, 2013 at 7:55 am

Sometimes, you do not have a choice. As a teacher, I contribute 8% to my pension, but it can be underfunded too. The good news is it is the biggest and best program in the country.

Holly@ClubThrifty April 22, 2013 at 8:22 am

I don’t mind saving for my own retirement at all. However, I think that the U.S. Healthcare system makes early retirement much harder to achieve. I know so many people who are working longer than they really need to just to hold onto their health insurance.

Krantcents April 22, 2013 at 8:54 am

I agree! I have to fulfill requirements for my retirement to receive lifetime medical. It is worth too much to just let it go.

Untemplater April 22, 2013 at 11:15 am

I’m not familiar with the retirement systems abroad. I have a friend who moved to Australia though and they have a much more small business friendly system there than here. I’ll give her a heads up about the increasing retirement age as I don’t think she has any plans to move back to the US. Thanks

Krantcents April 22, 2013 at 12:58 pm

You’re welcome! Perhaps the U.S. should consider the impact of some of the changes they want to make to the tax code and 401Ks.

Jenny @ Frugal Guru Guide April 22, 2013 at 12:49 pm

The Netherlands also pushes its elderly citizens into doctor-administered suicide at the highest rates in the world. That’s how they keep costs down. Doctors routinely ask the elderly what their plans are for the next year or two, and it their answers don’t stack up to what the doctor feels is a sufficiently rewarding life, they get pushed toward suicide or shuttled into hospice programs that often refuse even nutrition and hydration when patients are unable to feed and drink by themselves.

It’s not a trade off I’m particularly interested in.


Krantcents April 22, 2013 at 1:13 pm

On the surface, it sounds like a lousy choice. I would not want a life maintained by machines, but suicide is a lousy choice.

Darwin's Money April 22, 2013 at 7:38 pm

USA wasn’t on the list? Just kidding. This is a moving target; many European countries that used to have “great systems” are now in a state of decay/austerity. There’s no free lunch. Unless you’re Norway with their oil fund.

Krantcents April 23, 2013 at 6:52 am

The typical financing of these schemes is taxes. Some people like the concept.

KC @ genxfinance April 22, 2013 at 9:58 pm

I agree with Bobby. It doesn’t matter where you want to retire. It’s all about your savings. If you want to retire in some tropical island, UK or in Greenland, you got to decide and start saving for it.

Krantcents April 23, 2013 at 6:56 am

Retirement savings is always up to the individual, the various retirement schemes is not enough to really provide a comfortable retirement.

Money Beagle April 23, 2013 at 9:33 am

It’s up to people to fund their own retirement. Used to be that between Social Security, Medicare and pension, you could come out pretty well without worry. No more. It’s just the way it is in our new global economy!

Krantcents April 23, 2013 at 9:53 am

I always felt that it is up to the individual to take care of their own future retirement. Social Security is just one element in a plan.

Malcolm April 27, 2013 at 6:52 am

You didn’t mention Australia’s scheme. Australia has only 23 million people, yet it is the worlds 12 th largest economy and it has the 4th largest retiremement scheme in dollar value in the world.

Krantcents April 27, 2013 at 8:37 am

I did mention Australia, it follows the Netherlands.

Suzanne @ Financial Advisor Coach May 3, 2013 at 1:03 pm

I’m originally from Australia. Their system seems to be in very good shape. As you imply, each participant has an individual account. We seem to be “up in arms” over the idea of an individual account here in the U.S. Any idea why most are so opposed to this concept?

Krantcents May 3, 2013 at 2:15 pm

The current Social Security system has a guaranteed payment. With a private account, there is no guarantee. There is an upside with a private account a lot of people miss too. My pension through the school district has a guaranteed payment and my deduction (8%)is similar to Social Security. If I worked 40 years, I would receive nearly (96%) the same earnings in retirement.

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