Now in its 11th year, the Melbourne Mercer Global Pensions Index (MMGPI) compares 37 retirement systems across the globe and covers almost two-thirds of the world’s population.
This year it ranked the UK 14th and graded it a C+, with an overall index score of 64.4. The Netherlands had the highest index value (81), and has consistently held first or second position for 10 out of the 11 MMGPI reports. Thailand had the lowest index value at 39.4.
The UK ranked highly on integrity, with a score of 84 out of 100. But it ranked low on sustainability, with a score of 55.3, and low on adequacy (defined as people having adequate income to retire on), with a score of 60.
Finland had the highest score for integrity (92.3), Denmark for sustainability (82), and Ireland for adequacy (81.5). The lowest scores were the Philippines for integrity (34.7), Italy for sustainability (19), and Thailand for adequacy (35.8).
Recommendations for improving the UK’s system centred around raising the minimum pension for low-income pensioners, increasing contributions to workplace pension schemes, and increasing coverage of employees and the self employed in schemes.
Globally the research showed a strong correlation between the levels of pension assets and net household debt, with growth in household debt in developed and growth economies paired with the growth in assets held by pension funds.
Benoit Hudon, UK head of wealth at Mercer, said employers should be doing more to improve the UK's adequacy rating and ensure employees have enough to retire on. “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.
He added that better education around pensions could increase engagement: "A lack of understanding of what they will receive and what they will actually need in retirement has led to a gap in retirement savings for many employees. This begs the question as to whether employers should play a greater role, both in educating and supporting their workforce.
“Taking a more active role in securing employees’ retirement could support engagement and productivity, and help attract top talent.”
While each country's pension system has a unique set of circumstances, the report highlights that there are common improvements that can be made, added David Knox, a senior partner at Mercer and lead author of the study.
“Systems around the world are facing unprecedented life expectancy and rising pressure on public resources to support the health and welfare of older citizens," he said. "It’s imperative that policymakers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future.”
