The UK has failed to impress in an international analysis of pension systems due to serious concerns over sustainability.
The annual Melbourne Mercer Global Pensions Index compared 37 retirement systems across the world, which were graded on an A to D scale and ranked accordingly. The UK came in 14th with an overall index grade of ‘C+', representing an index value of 64.4 out of 100 - rising from 15th and a score of 62.5 last year.
Denmark and the Netherlands were the only countries to receive an ‘A' grade in the index with overall scores of 81 and 80.3 respectively. The two retirement systems were described as the most robust globally thanks to high levels of integrity and strong sustainability prospects.
The Dutch retirement system - which is made up of a flat-rate public pension and a quasi-mandatory earnings-related occupation pension linked to industrial agreements - has held first or second place in the index for 10 years.
The index uses the weighted average of the sub-indices of adequacy, sustainability and integrity to measure each retirement system against 40 indicators.
The adequacy index considered whether voluntary member contributions were favoured in each country's tax system, the minimum age for accessing funds, treatment of married and divorced couples, and access to accrued benefits on resignation from a workplace.
The UK was indexed as a ‘C+' for adequacy, while Ireland was the only country in this year's analysis to receive an ‘A' grade.
Employers in the UK may now have to work harder to narrow the retirement savings gap, according to Mercer head of wealth Benoit Hudon.
He said: "This begs the question as to whether employers should play a greater role, both in educating and in supporting their workforce. It's a lack of understanding that has led to a gap in retirement savings for many employees.
"Taking a more active role in securing employees' retirement could support engagement and productivity."
The integrity index looked both at the overall integrity of the pension system within each country, as well as funded schemes found in the private sector system.
It considered the roles of regulation and governance in each country along with the level of communication provided to individuals.
The UK was indexed with an ‘A' grade for integrity, ahead of Ireland, Canada and the United States.
Mercer noted sustainability as the most concerning index considered in its rankings, including nations' level of funding in advance, ratio of workers to retirees, and long-term economic growth prospects.
The UK was also ranked with a ‘C+' on this front, while Denmark was the only country to be indexed with an ‘A'.
The index makes several suggestions for improving retirement systems, adding countries should not wait until the "next crisis" faced to implement much-needed reforms.
Retirement systems globally have "common themes for improvement" due to "similar problems expected in the decades ahead", Mercer said.
Globally, the research found a strong correlation between the levels of pension assets and net household debt, with growth in debt in developed and growth economies paired with the growth in assets held by pension funds.
Senior partner Sir David Knox said: "As significant pension reform is being considered or implemented in many countries, it is important that we learn together to understand what best practice may look like, both now and into the future.
"There is a need to develop sustainable and robust retirement income products as retirees seek more control and flexibility over their financial affairs."
Among the recommendations from Mercer to improve retirement system sustainability is increasing the state pension age to reflect longer life expectancy.
The consultant said the move could then reduce the costs of publicly financed pension benefits.
Encouraging or requiring higher levels of private saving and frequently reviewing the level of public pension indexation were also recommended.
The average index value among all retirement income systems compared was 59.3.
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