UK pensions system falls four places in world ranking

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The UK's ranking has dropped to 15 in the Melbourne Mercer Global Pension Index (MMGPI) despite the country attaining a better score than last year.

The annual study conducted by Mercer and the Australian Centre for Financial Studies looks at 30 national pension systems on their adequacy, sustainability, and integrity.

While the UK's score improved from 60.1 in 2016 to 61.4 in 2017, and is a"system that has some good features", it also has"major risks and/or shortcomings that should be addressed".

The UK's score for adequacy rose from 55.5 to 58.2, sustainability from 48.8 to 49.4 and integrity from 83.2 to 83.5.

These all combined to lift the country's grade to C+ from C which was recorded in last year's survey.

However, the study noted that countries in the top tier such as Denmark, the Netherlands and Australia each have better systems, which have"sound structures", with"many good features", but with"some areas for improvement".

The study added the UK's ranking could be improved by raising the minimum pension for low-income pensioners, increasing the coverage of employees in occupational pension schemes and raising the level of contributions to occupational plans.

Mercer senior and report author Dr David Knox suggested countries such as the UK could learn from Australia, Denmark and the Netherlands.

"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," he said.

"Denmark, Netherlands, and Australia are three such countries which, while taking different approaches depending on their starting point, adopt a strong multi-pillar approach as highlighted in the Index."

Mercer president of health and wealth Jacques Goulet explained countries need to address sustainability when considering pension reform.  

Japan, Austria, Italy, and France are examples of developed economies whose pension systems do not represent a sustainable model that will support current and future generations in old age.

"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," he said.

"These pressures have alerted policymakers to the growing importance of intergenerational equity issues."

This year the index was expanded to include three new countries - Colombia, New Zealand and Norway.

 

This article was written by Michael Klimes from Professional Pensions and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.