US pension system is among the best in the world, but there are nine better

US pension system is among the best in the world, but there are nine better
New analysis of 71 pension systems finds US approach needs some reform.
FEB 03, 2025

The US pension system stands proudly among the best in the world but needs some reform according to a new report.

An analysis of 71 pension systems globally by Allianz Life puts the US at number 10, but sustainability remains a concern including Social Security coverage gaps and retirement savings shortfalls, especially as inequality rises.

The stats show that the US old-age dependency ratio - a demographic measure that indicates the proportion of elderly dependents (typically aged 65 and older) compared to the working-age population – will rise from 28% currently to 35% over the next 25 years, a significant increase, although this is less so than in Europe.

The rankings shows that nine pension systems are less in need of reform than the one millions of Americans rely on for a financially secure retirement: Denmark, Netherlands, Sweden, Japan, New Zealand, Israel, Australia, the UK, and Norway. The scores range from 1 (no need for reform) to 7 (acute need for reform) with the US at 3.2. With Denmark topping the league with a score of 2.3, there is room for improvement globally.

But the report highlights that pensions and retirement savings are becoming a key part of the inequality story, in the US and elsewhere.

Despite a well-developed pension system, there is concern that many Americans may not be saving enough for retirement. This is partly due to opt-out provisions and premature withdrawals, as seen during the COVID-19 pandemic, which depleted some pension reserves.

But the pension gap can be narrowed, helped by policies that encourage participation in workplace retirement plans but also in ensuring that workers who stay employed until older ages do not face discrimination.

“Gen Xers need to save more to ensure their desired standard of living in old age – that's indisputable,” said Ludovic Subran, chief economist at Allianz. “But we must not just look at one side of the equation, the savings efforts of households. It is crucial to think about pension security and capital market development together. Retirement savings must be invested profitably in future growth and innovation. This is the key to overcoming demographic change (as well as climate change).”

Related Topics:
How to restart Social Security benefits 

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