Social Security Privatization Works Worldwide
April 5, 2000
A number of countries, not including the United States, have fixed their retirement systems without reducing benefits or raising taxes. Sweden, Mexico, Great Britain, Poland and many other countries have implemented investment-based retirement programs that are far outpacing state-run pension systems.
Privatized plans vary, but usually include worker-owned accounts to which Social Security payroll taxes are diverted. The funds are invested in stock and bond funds chosen by individual workers.
- In Sweden last year, the stock market value of retirement funds increased 71 percent.
- In Mexico it went up 80 percent.
- Poland's private system's market value was up 44 percent.
- Great Britain's 18 percent increase was much greater than the outmoded retirement scheme, which 80 percent of the work force has chosen to leave.
The story is the same around the world for countries that have opted out of top-heavy, taxpayer-supported retirement systems and chosen private alternatives. Equities in workers' accounts grew 28 percent in Argentina, 12 percent in Australia, 49 percent in El Salvador, 69 percent in Hong Kong, 37 percent in Peru and 40 percent in Hungary, according to a Heritage Foundation study. According to the World Bank, every Latin American country except Cuba will have a private retirement system this year.
To take one example, Australian workers invested nine percent of their income in personal accounts last year and the Australian stock market grew 12.5 percent. Although this is less than the American system's 10.6 percent retirement payroll tax, the difference between what an Australian retiree will earn for his invested funds and what his American counterpart will receive in Social Security benefits amounts to hundreds of thousands of dollars.
Source: Cal Thomas, "A Way to Fix Social Security?" Fort Worth Star-Telegram, March 30. 2000.
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