The UK has retained a top 10 spot in the Mercer CFA Institute’s Global Pension Index.
The research includes 47 pension systems covering 64% of the world’s population and benchmarks each system using more than 50 indicators including sub-indices of adequacy, integrity and sustainability. The UK’s pension system has been ranked as the 10th best system in the world, while the Netherlands, Iceland and Denmark took the top three spots.
Stuart Price, Partner and Actuary at Quantum Advisory, says: “The UK has maintained its position in the top ten of the index. However, this ranking places it mid-table compared to pension systems in other developed countries.
“With an ageing population and a diminishing workforce, the UK is facing a ticking timebomb when it comes to funding retirement. As an industry, we need to work on getting people clued up about their pensions and the options available to them, or we risk a very uncertain future.
“The state pension, workplace and private pension arrangements are the main feeder for income in retirement. As the state pension can be changed by the government at any time, workplace and private pension saving is crucial to allow people to retire at a reasonable age with a decent level of income.
“However, savers are in a difficult situation. The decline in defined benefit pension schemes, usually the gold standard for individuals, is having a long-term impact on retirement savings and not enough is being saved in defined contribution pension schemes which have replaced defined benefit schemes.
“The UK could follow the example of other top 10 countries in the index and begin to embrace the collective defined contribution scheme which is prevalent in Denmark and is also in use in the Netherlands alongside a strong defined benefit pension system. The concept for the collective defined contribution scheme was introduced in the Pension Schemes Act 2021. It pools member and employer contributions together in a collective fund with shared investment and longevity risks, providing the potential to earn more than through traditional pension arrangements. As a good halfway house between defined benefit and defined contribution schemes, it has the potential to really help up our pensions game as a nation.”