Sobering Look at Retirement Systems in 11 Countries
Britain's government pension system is designed to protect retirees from misery, not make them comfortable. British retirees receive just 38% of their income from government pensions, far less than German and Italian retirees; British retirees get 26% from company pensions. Britain has a multi-tier state pension system, funded by a payroll tax in which higher earners pay more. The first tier is a basic state pension. For someone who's contributed for a full 30 years or more, it equals 110.15 pounds ($177.34) a week. It's the same for all retirees regardless of how much they contributed. A so-called second state pension is supposed to reflect an employee's earnings more closely. Complicated? Yes. Pending legislation would create a single-tier state pension.
Brazil is ranked second-best of 20 countries evaluated by the Center for Strategic and International Studies for maintaining retirees' incomes. But it's only No. 18 in its ability to pay for its retirement system over the long term. In the 1980s, Brazil introduced a generous government pension system before it became rich enough to afford one. The system is financed with a payroll tax; higher-paid workers contribute more. Brazilians need contribute for only 15 years to receive full benefits at age 65 (for men) or 60 (or women). Men can retire at 53 if they've contributed to the system for 30 years, women at age 48 if they've contributed for 25 years. For Brazilians who earned average wages, Brazil's pensions replace 97% of their old take-home pay, well above a 69% average for the Organization for Economic Cooperation and Development. Brazil will strain to pay those pensions as its population ages.
Italy's state pension program used to offer generous benefits, but they've been gradually declining since 1995. Until a 2004 reform, Italians could retire with generous benefits as early as age 57. Austerity measures enacted in response to Italy's debt crisis will raise the retirement age to 66 by 2018. Pensions, along with other programs like unemployment benefits, are funded by taxes. Despite the cutbacks that will reduce pensions for future retirees, Italians still rely mostly on the state pension. There's been discussion of ways to prod people to save more by encouraging or requiring company-based pensions or private savings. Only about a quarter of Italians are covered by a company pension. Italians get 72% of their retirement income from the government.
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