The UK has slipped out of the top 10 in a global annual report that assesses pension systems. The Mercer CFA Institute Global Pension Index 2024 ranked the UK 11th out of 48 countries worldwide. This marks a drop from its 10th place ranking last year and 9th place in both 2022 and 2021.
The report awarded the UK a “B” grade, placing it alongside countries like France, Germany, Switzerland, Ireland, Canada, and Sweden. The report highlighted that countries in this category have systems with strong structures but also areas for improvement.
Challenges loom ahead for the UK, as with many nations, in ensuring that individuals are financially prepared for retirement. Rising living costs and increased life expectancy are factors contributing to the strain on pension pots.
The top position in the ranking was retained by the Netherlands, with Iceland and Denmark following closely. These top-ranking countries were assessed to have exemplary retirement income systems with robust regulations and guidance for participants.
Benoit Hudon, Mercer’s UK president, emphasised the need for reforms in the UK’s pension sector to address the challenges faced in saving for retirement. Suggestions included expanding auto-enrolment, addressing the fragmented pension system, and encouraging productive asset investment.
The pension landscape globally is shifting towards defined contribution (DC) arrangements from defined benefit (DB) plans. DC schemes transfer the risks associated with retirement savings to individual savers, unlike DB pensions that promise a set income post-retirement.
David Knox, the lead author of the report, stressed the importance of collaboration among governments, policymakers, the pension industry, and employers to ensure the sustainability of retirement systems. He highlighted the necessity of maintaining retirees’ lifestyles akin to their working years.
In the UK, the government launched a consultation on expanding collective defined contribution (CDC) schemes, aiming to provide more predictable pension incomes based on collective investment performance. The consultation covers England, Scotland, and Wales, with Northern Ireland expected to follow suit.
A Department for Work and Pensions spokesperson outlined ongoing efforts to enhance retirement security in the UK. These initiatives include exploring options to expand automatic enrolment, boosting investments, and increasing pension pots to benefit over 15 million pension savers.
As the UK grapples with its pension system’s positioning on the global stage, the government’s commitment to enhancing retirement provisions remains a focal point to ensure financial security for its citizens.