Pensions ‘nudging’ (in the form of Automatic Enrolment and the other employer duties which go with quasi-compulsion) as a legal requirement is a relatively new idea in the UK and it’s longer term impact has the potential to close the ‘retirement gap’ which tends to be getting increasingly wider in the UK.

However whilst we talk quite a lot about the scandals, crises and the ever increasing retirement gap it turns out the UK is pretty good at putting in place a robust pension system.

Notice that I said good….and not great.

A study this year by the actuary and consultancy firm Mercers highlighted where they felt the UK sat when compared to other countries.

Now Mercers gave the countries surveyed an A to E grade, a grading system seemingly more appropriate to a Woodwork GCSE exam than a countries retirement income system (although strangely I liked this approach!).

And what Grade did the UK’s pension system get?

As I previously mentioned…It was good, but not great.

As a nation we received a C+

There were a bunch of countries who were perceived to have better pension systems than the UK including Denmark, Holland, Australia and Chile.

Weirdly when I saw this report it immediately reminded me of a conversation I had with my eldest daughter, Charlotte, last year…

Charlotte is pretty smart (she takes after her mum!) so I was shocked that in the autumn last year she’d slipped down to the second spelling group from the top on in the first time since infant school…

Now I mentioned Charlotte’s quite smart….and therefore her answer was quite clever :-

“I know I slipped down a group Dad but I’m still doing better than most of my class!”

The following conversation didn’t last long but resulted in me explaining the fact that I expect her to be the best she can be and work with some of the kids who are doing well so she can see what they are doing differently (although I suspect it’s just work harder).

I know….I’m a one of those dads!

Now whilst I still reckon that advice is pretty valid for Charlotte. I also think that we can look at the countries which have been independently assessed to have a better retirement income in place and look at some of the things we can learn from them.

Now I appreciate that some of these countries might have different taxation rules, societal issues, challenges, opportunities and risks I still think there’s some value in seeing if we can learn if there are any similarities in their retirement income arrangements which make them better at looking after their retirees than us.

When looking at all of these countries there is one clear similarity….

Australia – Compulsory employer contributions

Denmark – Mandatory occupational schemes

The Netherlands – Mandatory Participation in ‘second pillar’ occupational pensions

Chile -Mandatory Contributions

So, it’s clear from the mercer survey and a cursory glance over similarities in systems that one thing is clear. Although potentially painful to employers and employees compulsion works. It builds high quality pots of money and better outcomes for individuals in retirement.

It’ll take time (perhaps a generation) to start seeing the impact of the UK’s quasi compulsion. However if it’s anything like the countries across the world who have compulsion the future is brighter for our citizens when it’s embedded….

….and learning lessons and taking the lead from countries with great pension schemes (by having a degree of compulsion) is a great move in the right direction.