Raising pension contribution levels ‘could boost financial security in the UK’

The UK’s retirement system could be improved by bringing more people, including the self-employed, into private pension schemes and raising the contribution levels required under automatic enrolment, according to a global report.

The UK was graded “B” in the 17th annual Mercer CFA Institute global pension index – alongside several other countries such as Canada, New Zealand, France, Mexico, Belgium, Croatia, Germany and Ireland.

Countries which received an “A” grade included the Netherlands, Iceland, Denmark, Singapore and Israel. Those rated “B-plus” included Sweden, Australia, Chile, Finland and Norway.

The report noted that in the UK the minimum contribution rate under auto-enrolment is 8%. This is made up of employer and employee contributions and tax relief.

It said the overall “index value” for the UK system could potentially be increased by further increasing the coverage of employees and the self-employed in private pension schemes and increasing the scope and contribution levels required under auto-enrolment “to deliver increased financial security for more people”.

Restoring the requirement to take part of the retirement benefit as an income stream could also potentially increase the index value, it said.

Before the pension freedoms were introduced in the UK, people were generally required to buy a retirement annuity with their pension savings when they retired, rather than being able to take the pension pot how they wanted.

Reducing the level of household debt could also potentially increase the index value for the UK, the report said.

The index compared 52 retirement income systems globally this year. Countries that achieved index scores greater than 80 earned an A grade – reflecting offering a robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity, the report said.

It added that, although the UK retained its B grade, its index value increased slightly from 71.6 in 2024 to 72.2 in 2025, primarily due to updated economic growth data.

Amid rising global uncertainty, the growth and scale of pension fund assets are increasingly prompting governments to look for ways to channel some of this capital into national priorities, those behind the report said.

Tess Page, UK wealth strategy leader at Mercer said: “There has been little real change in the ranking of the UK since the last report.

“We have an opportunity with the Pensions Commission to make real changes in the UK. If we increase the scope of employees covered by private pension schemes and increase the levels of auto-enrolment, we could improve outcomes for current and future generations of UK workers.

“We believe there is a unique opportunity to modernise our pension system, to not only increase financial security for pension members, but to also contribute more directly to the growth of the UK economy.

“Mandating parts of the investment strategy, as contemplated under the Mansion House Accord, should not form part of the Government’s roadmap. We would instead like for the Government to work with the industry to develop a pipeline of investment opportunities and to create a globally competitive business environment, rather than introducing measures such as mandating investments.”

Margaret Franklin, president and chief executive of CFA (Chartered Financial Analyst) Institute, said: “As some systems look to pension funds to drive investments that are considered in the national interest, the professional investment community must guard against the unintended consequences that may arise when mandates or restrictions distort the system.

“As the index makes clear, the central purpose of pensions must remain to secure retirement income, guided by fiduciary duty above all else. Pension systems work best when they balance innovation and national priorities with the enduring responsibility to serve end-investors’ interests.”

A Government spokesperson said: “We’re reforming the pensions market to drive economic growth, ensure greater security in retirement and put more money in people’s pockets.

“Our Pension Schemes Bill will make pension pots work harder for savers and could boost an average earner’s pension pot by £29,000 while the Pensions Commission will tackle the barriers that stop too many saving in the first place.”