Although Canada’s retirement system is still considered one of the best in the world, its standing in a global ranking has dropped slightly to eighth from seventh place, according to an annual research report by Mercer LLC and the Australian Centre for Financial Studies (ACFS).

The slight decline in Canada’s score is due specifically to a reduction in the net replacement rate available for a median-income earner, the Melbourne Mercer Global Pension Index states.

Canada was bested by Denmark, the Netherlands and Australia, which landed in the top three. However, Canada’s retirement system still earned a grade of “B” and is described as a “system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system,” the report states.

The report includes some suggestions on measures that could be taken to improve Canada’s retirement system. These include:

> Increasing the coverage of employees in occupational pension schemes through the development of an attractive product for those without an employer-sponsored pension plan.

> Increasing the level of household savings for middle-income earners.

> Increasing the labour force participation rate at older ages as life expectancies rise.

Canada, under the Liberal Party, is actually moving in the opposite direction of most developed countries by moving the retirement age for old-age security back to 65 from 67, a plan put forward by the former Conservative government in 2013, the report states.

A positive move for Canada’s retirement system is the federal government’ and most provincial governments’ recent promise to expand the Canada Pension Plan, according to Mercer Canada.

“This expansion has not yet been recognized in the [index] and will help increase retirement benefits for those without an employer-sponsored pension,” says Scott Clausen, a partner in Mercer’s retirement business in Toronto, through a release.

The annual Melbourne Mercer Global Pension Index is sounding an alarm to all countries that they have to take immediate action in improving retirement systems as birth rates decline and populations continue to age.

The full report is available on a joint website that Mercer and the ACFS have published.

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