The UK has fallen four places in the Melbourne Mercer Global Pension Index for 2017, but has seen its overall score on the Index improve slightly.

Previously sitting at 11th place, the UK has been overtaken by Germany as well as three new entrants to the Index, Norway, New Zealand and Colombia. However, it has been given an overall ranking of 61.4 compared to 60.1 in 2016. The UK scored a C for adequacy, D for sustainability and A for integrity and retains a grade of C+ overall.

Now measuring 30 countries and covering 60 per cent of the world’s population, the ninth edition of the Index urges countries with unsustainable pension systems to take action now, rather than risk the need to take even more drastic action in the future.

The Index highlighted the UK's single tier state pension, supported by income-tested pension credit, and supplemented by voluntary occupational pensions and personal pensions. It also mentioned auto-enrolment which requires employers to enroll eligible staff into a pension, which it said was the reason for the UK’s improved score.

To improve the UK’s position in the Index, it recommended the government restore the requirement to take part of their retirement savings as an income stream, something which was scrapped in 2015 with the introduction of the pension freedoms.

It also suggested raising the minimum pension for low-income pensioners; increasing the coverage of employees in occupational pension schemes, as well as increasing contributions. It also proposed the government accelerate the intended increases in the state pension age.

Commenting, Mercer president of health and wealth Jacques Goulet said: “Increasing life expectancies and low investment returns are having significant long-term impacts on the ability of many systems around the world to deliver adequate retirement benefits both now and into the future. These pressures have alerted policy makers to the growing importance of intergenerational equity issues.”

However, Mercer senior partner and author of the report, Dr David Knox said that it’s not all “doom and gloom” as every county can now take action to move towards a better pension system. “The primary objective of the Index is to benchmark each country’s retirement income system so we can learn to understand what best practice may look like, both now and into the future.

“From our research, it is clear which countries are leading the way in providing sustainable pension systems with adequate benefits and what others can learn from them to improve. Denmark, Netherlands, and Australia are three such countries which, whilst taking different approaches depending on their starting point, adopt a strong multi-pillar approach as highlighted in the Index.”

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