The UK pension system has been ranked the 9th best in the world, landing itself with a ‘B’ grade, which is just shy of the ‘C’ border.

According to the annual Melbourne Mercer Global Pension Index, which ranks 25 countries’ pension systems, the UK's position remained unchanged on last year under fears it isn't sustainable enough.

The UK's points dropped down to 65 out of a possible 100, from 67.6 in 2014. The score needed for a B is 65, meaning the UK narrowly managed to cross the border.

Mercer attributed the fall in points to the new pension freedoms as it was concluded that measures would need to be taken to improve the system’s sustainability. It added that the UK’s unfunded state pension promises, low level of retirement saving, increasing old age dependency ratio and substantial government debt threaten its ability to deliver adequate retirement incomes.

Despite this, the UK score is expected to rise again over the next year as the impact of auto-enrolment becomes more apparent, although the report suggests minimum required contributions alone are unlikely to lead to adequate retirement incomes for many.

Denmark , the Netherlands and Australia were ranked as the top three pension systems in the world. Denmark, which has held the top spot for the second year running, scored 81.7 as a result of its ‘good coverage, high level of assets and contributions, provision of adequate benefits and a private pension system with developed regulations’.

Mercer senior partner and the report’s author Dr David Knox said implementing the right reform to improve pension systems and provide financial security in retirement has “never been more critical” for both individuals and soceities.

“The MMGPI is an important reference for policy makers around the world to learn from the most adequate and sustainable systems. We know there is no perfect system that can be applied universally, but there are many common features that can be shared for better outcomes,” Knox said.

Mercer UK retirement business senior associate Glyn Bradley added: “The UK’s new pensions freedoms is a welcome once-in-a-lifetime change but it poses difficult challenges in ensuring that tax-privileged saving is used to provide an adequate income in the final years of life, and not exhausted in middle age.

“Despite the introduction of auto-enrolment and record numbers of people in the UK enrolled in pension schemes, the UK is unlikely to make the A grade soon.

"Having a pension’ is not the same as having an adequate pension. The UK lacks the savings culture of other countries and current minimum auto-enrolment contributions are unlikely to deliver adequate retirement outcomes.”

Share Story: