The UK remained in 15th place in the Melbourne Mercer Global Pension Index for 2018, but has seen its overall score on the Index improve slightly.
Despite its overall score increasing from 61.4 in 2017 to 62.5 this year, it was not enough to improve the country’s ranking.
The UK ranks below Colombia and Chile and scored a C for adequacy and sustainability, an A for integrity and retains a grade of C+ overall.
Mercer partner, Brian Henderson, commented: “The UK scored well on the integrity of its pension system, with a sound approach to regulation and governance, but must take action now to increase provision for low earners and the self-employed. Measures are underway to improve the UK’s global standing, but this alone will not be sufficient.”
The index is in its tenth year, now measuring 34 countries, and highlights the struggle countries are facing to deliver both financial security for retirees which is both adequate for the individual and sustainable for the economy.
Mercer Australia senior partner, Dr David Knox, said: “It’s a challenge that policymakers are grappling with. For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is – what’s an appropriate trade-off?”
The UK’s improved score was primarily credited to the success of auto-enrolment. However, the country continues to be weighed down by the relatively low levels of provision offered to the poorest pensioners and the self-employed, and the removal of requirements to take retirement savings as an income stream.
To improve its ranking, the index recommended a gradual increase to the average retirement age, to increase the level of savings and to improve the coverage of private pensions across the labour force.
It also suggested reducing the access of benefits by members before retirement and improving the transparency of the operations of pension plans.
Henderson added: “More widely, with a tight labour market, employers should attract and retain talent by improving workplace pension schemes. This can improve the financial wellbeing of employees and create a more productive workforce.”
The Netherlands and Denmark took the top two spots, with scores of 80.3 and 80.2 respectively, and were the only nations to achieve an A rating. The new entrants to Mercer’s Global Pension Index were Hong Kong SAR, Peru, Saudi Arabia and Spain.