On the go: The UK’s retirement system has improved, according to the latest Mercer CFA Institute Global Pension Index, but more must be done to reduce the gender pensions pay gap and adequacy for lower-paid workers.
In the 13th annual MCGPI, a study of global pension systems accounting for 65 per cent of the world’s population, the UK ranked ninth and was given a B rating.
This was a vast improvement from 2020, when the UK system scored 64.9 in 15th place. This year the country scored 71.6, driven by the impact of auto-enrolment.
By comparison Iceland, which was new to the index in 2021, was considered to have the best retirement system, followed by the Netherlands and Denmark, with all three systems receiving an A grade.
However, Tess Page, partner and trustee at Mercer, has warned that despite the improvements, those approaching retirement in the UK still face a cliff edge, an issue that is only expected to accelerate in the coming years.
“There are a number of actions that employers, trustees and the government could take to help improve the UK system and deliver better long-term retirement outcomes,” she said.
“A great start would be further increasing auto-enrolment contributions and coverage — notably to better serve those who are self-employed.”
Page added that a significant opportunity to further improve the system is the UK’s leadership on managing pension scheme climate change risk, which was highlighted in a survey Mercer conducted recently with the CBI.
“By managing climate risk, it provides a path to sustainable investment returns and helps with scheme member engagement,” Page continued.
“That said, so far it has been a little too much talk and not enough action. Many pension schemes do not know where to begin, but there are small changes that can be effective, such as basic assessments to evaluate what actions will ensure most impact.”
The analysis also highlighted that all regions had significant differences in the level of retirement income across genders, with the UK gender pensions gap currently standing at 40.5 per cent.
The study suggested that pension design flaws were aggravating the issue, alongside well-known employment issues such as more females working part-time, taking longer periods out of the workforce for caring responsibilities, and lower average salaries when compared with men.
