

How retirement systems vary, country to country

By: The Associated Press
December 28, 2013 Updated: December 30, 2013 at 7:16 am


Here's a look at retirement systems in key nations:










Older French workers who want to retire early have a good deal: The minimum age for a full pension for most of them is just 62 as long as they've contributed to the system for at least 41.5 years. France has a tax-funded pension and mandatory employer programs. A worker who earned France's median wage receives 60.8 percent of pre-retirement take-home pay. In October, France raised the contribution period to receive a full public pension from 41.5 to 43 years — but only after 2020. By then, most of France's baby boomers will have retired.


Britain's government pension system is designed to protect retirees from misery, not make them comfortable. British retirees receive just 38 percent of their income from government pensions, far less than German and Italian retirees; British retirees get 26 percent 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 percent of their old take-home pay, well above a 69 percent 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 percent of their retirement income from the government.


Australia's system is considered a model in ensuring that people save enough for retirement. A 1993 program requires employers to contribute an amount equal to 9.25 percent of a worker's income into a retirement fund. (The required contributions will rise to 12 percent by 2020.) Australians can't withdraw money in their accounts before retirement. Most Australians also receive a government pension financed from general tax revenue. In the Center for Strategic and International Studies' rankings of 20 countries' retirement systems, Australia is ranked fourth-best in ensuring comfortable incomes for its retirees. It is sixth-best in its ability to finance its system.


South Korea's retirement system is stingy and getting stingier. A government program pays benefits depending on average income and years of contributions. Full pensions are available at age 60; the age will rise to 65 by 2033. In 2008, the typical retiree could expect a government pension equal to half of average pre-tax earnings. But that figure is being gradually lowered to 40 percent in 2028. Employees and employers must contribute 4.5 percent of wages each toward retirement. The self-employed can choose to pay up to 9 percent. Companies also offer 401(k)-style pensions, severance packages or individual retirement accounts. Workers can receive both the government and employer plans. But many elderly South Koreans are struggling: They are living longer than they had expected and didn't save enough for old age. Many also counted on their children to care for them in retirement — a system that's breaking down as younger workers prefer to live on their own. The country has the developed world's highest poverty rate among the aged: 45.1 percent, compared with an average 13.5 percent for 30 countries in the Organization for Economic Cooperation and Development.


Denmark offers a basic government pension and a supplementary benefit in which people receive less as their income rises. Government pensions are funded on a pay-as-you-go basis from tax revenue. There's also a government pension based on an individual's contributions at work. Additionally, 90 percent of full-time workers are covered by company pensions. The typical retiree receives nearly 95 percent of average pre-retirement, take-home pay. The poorest pensioners receive an annual payment of 7,800 kroner ($1,400). The retirement age is 65, rising to 67 starting in 2024. After 2025, the retirement age will be indexed to life expectancy to account for longer lifespans.

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