An international analysis of state pension systems has revealed that the UK offers the 14th best state pension in the world, behind frontrunners such as Denmark, Sweden, Australia and Finland.
The Melbourne Mercer Global Pension Index found that the Netherlands and Denmark were the only countries (out of 37 included in the final report) that were worthy of the highest A-grade, with each receiving a score of 80 or more.
Germany, meanwhile, ranked one place above the UK was given a lower B grade, which indicated “a system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system”.
The report, which is supported by the Government in Australia, lists pensions according to adequacy, which covers system design and tax support; sustainability, covering contributions and total assets; and integrity which includes regulation and governance.
Coming 14th place puts the UK ahead of other developed economies such as France and the US, but only gives the nation a C+ Grade. Nevertheless, the UK improved its score to 64.4 in 2019 from 62.5.
Countries within this bracket are described as having “A system that has some good features but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned.”
Benoit Hudon, head of wealth, Mercer UK, said: “The UK retirement system’s strong score for integrity needs to be matched by improving adequacy, in other words, what people actually receive in retirement.”
He said a lack of understanding of what they will receive and of what they will actually need in retirement has led to a gap in retirement savings for many UK employees.
“This begs the question as to whether employers should play a greater role, both in educating and supporting their workforce,” Hudon said.