The UK has maintained its B grade in the latest Mercer CFA Institute Global Pension Index.
Meanwhile, Singapore has become the first Asian country to achieve an A rating, joining the Netherlands and Iceland at the top of the global rankings.
The 17th annual report from Mercer and the CFA Institute assesses retirement income systems across adequacy, sustainability and integrity. Countries scoring over 80 received an A grade for strong and sustainable pension systems. Kuwait ranked highest for adequacy, Iceland for sustainability and Finland for integrity. Meanwhile, eight countries improved their scores this year and none dropped, which suggests a steady global progress in retirement provision.
Mercer UK wealth strategy leader Tess Page says: “Like many countries around the world, the UK is facing a pensions savings gap, estimated to be £25 trillion by 2050. There is a shortfall between what we need for a comfortable retirement, and what we are saving. There has been some progress in the UK and auto-enrolment has been a success (with more to do), but there has been little real change in the ranking of the UK since the last report.
“We have an opportunity with the Pensions Commission to make real changes in the UK. If we increase the scope of employees covered by private pension schemes and increase the levels of auto-enrolment, we could improve outcomes for current and future generations of UK workers.
“We believe there is a unique opportunity to modernise our pension system, to not only increase financial security for pension members, but to also contribute more directly to the growth of the UK economy. Mandating parts of the investment strategy, as contemplated under the Mansion House Accord, should not form part of the government’s roadmap. We would instead like for the government to work with the industry to develop a pipeline of investment opportunities, and to create a globally competitive business environment, rather than introducing measures such as mandating investments.”
CFA Institute president and CEO Margaret Franklin says: “Regulations and government actions — from tax policies to investment mandates — profoundly shape how pension funds can allocate capital. As some systems look to pension funds to drive investments that are considered in the national interest, the professional investment community must guard against the unintended consequences that may arise when mandates or restrictions distort the system. As the Index makes clear, the central purpose of pensions must remain to secure retirement income, guided by fiduciary duty above all else. Pension systems work best when they balance innovation and national priorities with the enduring responsibility to serve end-investors’ interests.”
Mercer partner and lead author of the report Tim Jenkins says. “Pension systems with no or limited restrictions tend to perform better in the Index. This suggests that instead of imposing mandates, governments can focus on making investment options attractive, promoting transparency and sound governance, and fostering collaboration with the private sector to support sustainable retirement systems and economic growth.”
