The research’s primary aim is to benchmark each retirement income system, but it also highlights areas of reform which could provide greater trust in the pension system of each country as well as increased sustainability and improved benefits.
The UK’s pension system has been ranked as the 11th best system in the world with a value of 71.6, dropping one place since 2023 and out of the top 10. The Netherlands, Iceland and Denmark retained their top three spots for another year.
The index reports that the value for the UK system could be increased by further increasing the coverage of employees and self-employed in private pension schemes, restoring the requirement to take part of the benefit as an income stream (ie not allowing individuals to take all of their retirement savings as a lump sum) and increasing the scope and contribution levels required under auto-enrolment.
Stuart Price, Partner and Actuary at Quantum Advisory, said: “It is disappointing to see the UK’s pension system slip out of the top 10 of the Global Pension Index this year. Its ranking places it as a ‘B’ grade system within the index, suggesting that the system has a sound structure and many good features but that there are clear areas for improvement and reform. The state pension only provides 22% of an individual’s average earnings, so private pension saving, whether in defined benefit, defined contribution or collective defined contribution schemes, is crucial to allow people to retire with a decent level of income and at a reasonable age.
“All employers must provide a workplace pension scheme or arrangement and automatically enrol employees into it. Auto-enrolment has worked to a degree but would benefit from further reform which could improve the UK’s index ranking. The number of individuals saving for their retirement has increased substantially since auto-enrolment was introduced in 2012, with 76% of the working population contributing to their pension schemes. However, auto-enrolment could be extended to include younger workers from age 18, lower earners and the self-employed, in addition to increasing the total contribution rates from 8% to at least 12%. Following a review in 2017 which received royal assent in September 2023, plans are in place to lower the age of eligibility for auto-enrolment but frustratingly no date has been set to introduce this legislation.”
|
