Despite the introduction of auto-enrolment, the UK pension system still lags behind Sweden and Australia because of lower contribution rates and population growth, according to research from Scottish Widows.
The pension provider ranked the design and sustainability of pension systems in 34 countries according to 10 criteria based on data from the World Bank, the CIA World Factbook data and Trading Economics database.
The UK came in third place and Sweden, which ranked first, scored highly on its global competitiveness, labour market participation rates and its GDP per capita, which all support a sustainable pension system.
Although it doesn’t have an auto-enrolment scheme, it does have a three-tiered pension system where employees benefit from some compulsory employer contributions, Scottish Widows said.
Only four countries of those analysed by the provider had auto-enrolment policies, with Australia among these and in second place of the overall ranking.
The country introduced a compulsory pension saving policy in 1992 for all employees aged 17 and older, which saw the level of employer contributions rise from 3 to 9.5 per cent and will reach 12 per cent by 2025.
In the UK – which shared third place with Denmark – has had an auto-enrolment policy since 2012, with the current level of minimum contributions set at 5 per cent. It will increase to 8 per cent in April 2019.
New Zealand, in the overall fifth place, and Italy, which ranked 11th, also have compulsory saving policies.
Robert Cochran, retirement expert at Scottish Widows, said auto-enrolment had been successful, but "more needs to be done to engage savers and ensure they’re putting aside enough to fund the retirement lifestyle they want".
He said: "There’s a great deal the UK can learn from how others are preparing for retirement.
"Australia, for example, has had an auto-enrolment policy for more than 25 years – a journey the UK is currently only six years into. It takes time for these policies to have their desired effect but the longer-term impact is invaluable."
Mr Cochran said this analysis supported the provider’s call to scrap the £10,000 earnings threshold and make auto-enrolment inclusive for more workers.
He said: "We’re also calling on the government to reduce the age at which workers are auto-enrolled from 22 to 18 more quickly than it has proposed."
In the auto-enrolment review published in December, the Department for Work and Pensions (DWP) announced it would be making changes to the age for auto-enrolment of workers into workplace pension schemes from 22 to 18-years-old, and changing the way pension contributions are calculated.
But these changes are only expected to come into force by mid-2020s.