Britain's pensions are improving, but still lag behind the likes of Denmark, Australia and Finland.
Mercer and the Australian Centre for Financial Studies have put together a report on the state of pensions in 25 countries around the world. The UK was ranked in 9th place with a score of 67.6, up on last year’s 65.4.
Britain’s increase is partly down to the pension auto-enrolment programme, which has helped move our pensions up from a ‘C+’ to a ‘B’ grade.
Pensions were ranked based on:
- Adequacy
(Tax support, benefit design, growth assets) - Sustainability
(Demography, coverage and governmental debt) - Integrity
(Regulation, governance and costs)
Britain performed above average in all of the categories, especially integrity (85.4). The weakest was sustainability (52.4) suggesting that maintaining our current levels of saving with an ageing population may be problematic in future.
Leading the way
The front-runner is Denmark with an impressive 82.4, scoring well above average in all three categories.
Here are the top ten best nations for pensions according to Mercer:
|
Country |
Overall Index Value |
|
Denmark |
82.4 |
|
Australia |
79.9 |
|
Netherlands |
79.2 |
|
Finland |
74.3 |
|
Switzerland |
73.9 |
|
Sweden |
73.4 |
|
Canada |
69.1 |
|
Chile |
68.2 |
|
UK |
67.6 |
|
Singapore |
65.9 |
India scored the lowest at 43.5, not much more than half of Denmark's total. China, South Korea and Indonesia also fared particularly badly, scoring between 43 and 50.
However, Mercer warned that the Government’s plan to abolish restrictions on accessing pensions early may hurt next year’s ranking. It made no mention of how the single-tier pension system will affect rankings once it’s introduced in 2016.
Worst in Europe
The Mercer report is the second one published in the last week looking at the different standards of pension on offer across different countries.
Better Finance, a lobby group, argued that Britain is actually one of the worst places in Europe to have a pension.
Its report, Pension Savings: The Real Return, found that the real value of British pensions has shrunk by 0.7% a year on average since the year 2000. At that rate, £100,000 invested at the turn of the millenium would be worth just £90,600 today. In comparison Danish pensions have grown 4.8%, which would turn that same pot into £192,778 in today's money. Polish and German savers would also enjoy far better returns at 4.7% and 2.2% respectively.
Britain is at least in a better position than Spain, where a £100,000 pot would now be worth just £84,500.
Charges and comparatively higher inflation are partly to blame for Britain's poor performance. Indeed, the authors said they were "surprised" by the lack of transparency around what people are charged for their pension.