The UK has fallen one place to 10th in the Mercer CFA Institute Global Pension Index, with Iceland retaining its spot as the number one ranked pension system in the world.

As reported by our sister publication, European Pensions, European pension systems made up the majority of the top 10, with Netherlands ranking second with a score of 84.6 and Denmark in third with 82, both retaining their spots from last year’s index.

The index ranks counties based on their retirement income systems' adequacy, sustainability and integrity.

The UK dropped one place to 10th with an overall score of 73.7, scoring 63.9 for sustainability, 76.5 for adequacy and 83 for integrity.

Concerns were raised within the report about the global shift from defined benefit (DB) to defined contribution (DC) pension schemes, which it said had increased uncertainty for retirees.

“With the cost-of-living crisis front of mind, all hands including policy makers, trustees and providers need to work together with individuals to improve retirement outcomes," commented Mercer UK head of DC, Philip Parkinson.

“Failure to address some fundamentals around auto-enrolment coverage and savings levels and the levels of household debt, will build up over time leading to a retirement crisis for ‘Generation DC’.”

Iceland received the highest score for adequacy and sustainability, at 85.8 and 83.8 respectively.

Finland, which ranked fifth overall with a score of 77.2, scored highest for integrity (93.3) but was let down by its comparatively low score for sustainability (65.3).

Other European countries in the top 10 included Norway at seven with a score of 75.3, ranking highly for integrity (90.3) but low on sustainability (60.4) and Sweden at number eight with 74.6, with its score for all three criteria in the 70s.

Austria was found to have the lowest score for sustainability of all the 44 systems assessed by the index at 22.7, and was the lowest ranked of all the European systems included in the index at 32nd.

“Since the inception of the Mercer CFA Institute Global Pension Index, the investment management and pension industry at large have faced extraordinary challenges,” commented CFA Institute president and CEO, Marg Franklin.

“New financial products and strategies will be required to deliver adequate returns for beneficiaries. This past year, we’ve gone from a ‘lower for longer’ interest-rate environment to significant rates of inflation, quadrupling of interest rates in some global markets and a rise in the cost of living for many, all of which have a significant impact on the fixed income of retirees.”

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