The introduction of auto-enrolment pensions provider NEST has made the UK’s pension system more durable in relative terms, pushing the country into the world’s top 10 sustainable pension systems, a study has shown.
Allianz Global Investors’ latest pension sustainability index places the UK at number 10 in 2014, up from 12th position in 2011 when the last index was calculated.
Andreas Hilka, head of pensions Europe at the asset manager, said: “With the introduction of NEST, a simple yet sophisticated auto-enrolment scheme, the UK took an important step towards enlarging the share of people saving for their retirement.”
He said the recently announced overhaul of the annuities market and the decision to cap auto-enrolment charges showed more reform was clearly on the agenda in the UK.
Removing the tax incentives for purchasing an annuity may act as a catalyst for a more efficient pension system, Hilka said.
“By allowing greater choice, retirees can choose from a far wider range of income-generating products to suit their circumstances and preferences,” he said.
But he said it was important to make sure savers had access to all the information, tools and advice they needed to stop them falling into economic hardship at the end of their lives.
As in the 2011 study, Australia came out as the country with the most sustainable pension system in the index ranking, followed by Sweden in second place.
New Zealand took third place, followed by Norway, the Netherlands and then Denmark.
Denmark fell by three places between 2011 to 2014, while Norway rose by three.
Among European countries, Ireland, Luxembourg and Romania rose more than five places between 2011 and 2014, while France, Malta, Slovenia and Croatia fell more than five places.
Australia was under the least pressure to reform pensions, Allianz Global Investors said, with its two-tiered system of lean public and highly developed funded pensions.
It said the Western European countries in the top 10 benefited from their comprehensive pension systems that were based on strong, funded pillars.
Sweden and Norway, meanwhile, had comparatively solid public finances, and Norway benefited from a high legal retirement age and moderate ageing demographics, the asset manager said.