“With all the bombardment of talk regarding the vast amount of Baby Boomers that are heading into retirement now or in the next few years, people are worried. Combined with rising debt levels, those retirees are worried about their Canada mortgage and how they’re going to pay it off when they no longer have income coming in. Everyone else on the other hand, is just as worried, thinking that the Boomers are going to suck Canada’s pension program dry, so that there’s nothing left for future generations. But, is our pension system really so fragile that it can’t handle a few million Boomers retiring all at the same time? Not if you ask around.
According to Mercer’s 2011 global index, there is just a handful of countries that have sustainable pensions and that make the grade, and Canada is one of them with a current score of 79.7 out of 100 for the integrity of our system; and a score of 74.1 out of 100 for adequacy. The grade, as outlined in the index, is an actual grade, just like you used to get in school on a scale of A, B, C, etc. Canada is one of only five nations that currently holds a B grade for our pension system; the others are Sweden, Australia, Switzerland, and the Netherlands. The United States is one of many that has received a ‘C’ grade for their pension systems.
The report gives some indications as to how grades are decided. Pension systems that get a ‘B’ grade, according to the report have “a sound structure with many good features, but has some areas for improvement that differentiate it from an A-grade system. Adequacy is based on funding. Sustainability is based on demographic trends.” So while we do have an above-average pension system, there are still some of those obvious flaws that we can all see – such as too many people, not enough money.
But even with those problems, Mercer’s isn’t the only one that thinks Canada’s doing okay; an AdvisorOne report recently published also listed Canada’s system as number five for pension systems. So we can probably all relax and know that the pension system will still be in place for future generations, and we probably won’t have to rely on second mortgages in our retirement years. “
