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.
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