The UK must do more to address its ageing demographics, said Mercer, as its global pension index shows the country static in its rankings.
Ranked 15th of 33, the same level as last year, the UK scored a C+ for its pensions system, grouped alongside Colombia, Peru, and France, and described as having “some good features” but also “major risks and/or shortcomings that should be addressed”.
Further, without improvement, the “efficacy and/or long-term sustainability” of the UK’s system “can be questioned”, the Melbourne Mercer Global Pension Index 2018 said.
However, while the grade and ranking remained the same as in 2017, the UK’s retirement income system did see its overall index value increase from 61.4 to 62.5, a growth the index said was largely aided by the increase in auto-enrolment (AE) minimum contributions earlier this year.
With AE minimum rates set o increase again next year, to a total of 8%, and the long-term effects of the policy to be seen in a few decades, the UK should see “broadening coverage and an increase in the level of funded retirement benefits” improve its index position.
Nevertheless, the consultancy said further reforms could be made, including undoing the pension freedoms by requiring savers to purchase some form of regular income, extending AE to the self-employed and a wider range of employees, and increasing contributions further.
It also called for an accelerated timeframe for future state pension age rises, and bolder efforts to be made to boost household saving and reduce household debt.
Partner Brian Henderson said the country must “take action now” to help low earners and the self-employed.
“Measures are underway to improve the UK’s global standing, but this alone will not be sufficient,” he said. “For example, the UK will benefit from the impact of AE as the number of employees participating in private pension schemes grows and levels of pension savings improves, particularly with minimum contributions increasing.”
On three ‘sub-indices’, the UK was graded ‘C’ for both adequacy and sustainability, with these values rising from 58.2 to 57.8 and 49.4 to 53.4 respectively. Meanwhile, for integrity, an ‘A’ grade was granted, although the value fell from 83.5 to 82.9.
Only two nations were granted an overall ‘A’ grade – the Netherlands and Denmark – having demonstrated a “first class and robust” system.