Chancellor George Osborne’s Budget reforms will have a negative impact on the long-term sustainability of the UK pensions system, global consultancy Mercer claims.
Auto-enrolment has helped the UK improves its score in the annual Melbourne Mercer Global Pension Index of private and public pension systems around the world, but the introduction of new flexibilities for savers from April 2015 “would likely negatively impact on the UK score next year”.
The UK is currently ranked 9th out of 25 in the index, which measures the adequacy, sustainability and integrity of national pension systems.
Mercer partner Deborah Cooper says: “The UK has previously struggled with issues around sustainability, mainly due to the number of people covered by our pensions system. The introduction of auto-enrolment, which is currently being phased in, has helped improve the sustainability rating in this year’s index.
”This will continue to improve over the next five years as the level of contributions increases and auto-enrolment completes.”
However, the consultant adds: “The process of significantly relaxing restrictions around accessing pension savings by opening up more alternatives to annuitisation would likely negatively impact on the UK score next year.”
Denmark tops the index, with Australia and the Netherlands in second place.