Martin Lewis outlines pension scheme for 16-21 year olds
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European Union (EU) pension comparisons are regularly made as British savers feel their payments and prospects rank particularly low. Recently, this concept was examined in detail through a House of Commons Library Briefing Paper.
Produced by Roderick McInnes on April 9, this report made international comparisons between pension systems among UK, EU and OECD savers.
Within this report, Roderick examined the Mercer CFA Institute Global Pension Index, which annually makes cross-country comparisons of pension systems between 39 countries.
The 2020 report scored and ranked the pension systems of these countries based on more than 50 indicators, which were in turn sub-indices of adequacy, sustainability and integrity.
The latest result placed the UK in 15th place, achieving an overall score of 64.9 (out of 100) with a corresponding grading of C+.
The Netherlands topped the leaderboard with a score of 82.6 and an A grading.
Denmark placed second with a score of 81.4 and another A grade.
Many EU countries dominated the top 10, with Finland, Sweden and Norway all making an appearance.
In total, eight European countries scored a higher grade than the UK and six EU countries placed below it.
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Following on from this, Roderick went on to provide the following commentary: “The UK system has achieved a ‘C+’ grade in each of the last five editions.
“This denotes ‘a system that has some good features but also has major risks and/or shortcomings that should be addressed. Without these improvements, its efficacy and/or long-term sustainability can be questioned.’
“The report indicates that the UK’s overall score is mainly affected by its below-average performance in the ‘adequacy’ sub-index.
“The report’s authors recommend a range of measures to boost the UK’s score, for example supporting pension adequacy through:
- Restoring the requirement to take part of retirement savings as an income stream
- Raising the minimum pension for low-income pensioners
- Further increasing the coverage of employees and the self-employed in pension schemes, and the level of contributions.
“The UK ranks relatively highly in terms of integrity (relating to issues of regulation and governance).
“Denmark and the Netherlands have consistently been at or near the top of the Melbourne Mercer index, and have taken first and second in the last six editions (2015 to 2020).
“Both countries scored an ‘A’ grade in 2020, meaning a ‘first-class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity.'”
Recent research from myFRP detailed that many people entering retirement are drastically unprepared.
Based on a Censuswide survey of 2,000 UK-based consumers across a nationally representative sample in February 2021, it was shown that 23 percent of over-55s in the UK have no pension at all.
The same research detailed only 27 percent of the UK keeps track of their pension plans and investments and these issues are more prevalent among women.
Bernerdine Noronha, the entrepreneur behind myFRP, commented on what needs to be done to boost UK retirement prospects: “Our research shows a worrying number of Brits will be without much financial support in their later years, which paints a bleak picture of the reality for workers in the UK.
“We can also see that many Brits find it difficult to keep track of things like pension plans and employer insurance, leaving many confused and without a clear picture of what kind of support they are receiving from their employer, and how their finances are looking. We need workplaces to do more to make these things easier to keep track of and to understand, and more investment in tools that allow people to keep an eye on their personal data and financial information.”
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