4 Countries with Better 401(k) Plans than the United States

These foreign retirement accounts have lower fees and clearer disclosures than U.S. 401(k) plans.


United Kingdom. Beginning between 2012 and 2017, all employers will be required to automatically enroll eligible employees in a retirement account and provide a minimum contribution. Employers that do not offer a retirement account can automatically enroll their employees in a new national retirement account, the National Employment Savings Trust (NEST). Initially, a minimum of 2 percent of earnings must be contributed, with at least 1 percent coming from the employer. The contribution amount will increase to 8 percent by 2018, with the employer contributing a minimum of 3 percent, up to an annual contribution limit of £4,400. NEST will levy a 0.3 percent annual management charge and a 1.8 percent charge on contributions. "I have been very impressed with the mechanics that underlie how the NEST will operate. Should the scheme succeed, then I believe it will provide an excellent example of current best practice in the specification of private pensions," says Justin van de Ven, a senior research fellow at the National Institute of Economic and Social Research in London. "Should it fail, then I suspect that it will provide a case study of poor implementation."

In contrast to retirement accounts in these four countries, U.S. retirement accounts are entirely voluntary for both employers and workers. And the Labor Department's new fee-disclosure requirements will not actually show employees the effect of fees on their accounts over time in dollar amounts or the cumulative amount they have paid. "While Labor has made recent improvements to U.S. participants' fee disclosures, fee disclosure improvements made by some of the countries we reviewed may provide more transparent disclosures," the GAO report found. "U.S. participants typically do not receive the simple, useful, and more targeted information about their defined contribution retirement plans and investment options that is provided to participants in Chile, Sweden, and Australia, which could be why recent research shows that U.S. participants have misconceptions about the fees they pay."

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