The United Kingdom’s retirement income system comprises a flat-rate public pension supported by an income-tested pension credit; an earnings-related pension based on revalued average lifetime salary; and voluntary private pensions, which may be occupational or personal. From 2016 the state flat-rate and earningsrelated pension components will be replaced with a single tier state pension. Auto enrolment is currently being phased in, requiring employers to enrol employees in pension schemes with minimum contributions (increasing to 8% in 2018), with the facility for employees to opt out.
The overall index value for the British system could be increased by:
- restoring the requirement to take part of retirement savings as an income stream
- raising the minimum pension for low-income pensioners
- increasing the coverage of employees in occupational pension schemes
- increasing the level of contributions to occupational pension schemes
- raising the level of household saving
- increasing the labour force participation rate at older ages
The British index value fell from 67.6 in 2014 to 65.0 in 2015 primarily due to the removal of any requirement for retirees to purchase an annuity. The expected increased coverage from auto enrolment to occupational pension plans has not yet come through in the available international data.