Retirement Reforms Push UK into Top 10 Most Sustainable Pension Systems

The UK has joined the list of the top ten most sustainable pension systems across the globe for the first time.

According to the Allianz Global Investors Pension Sustainability Index (PSI), the country's pension system has benefited from the introduction of auto-enrolment pension provider the National Employment Savings Trust (Nest).

The defined contribution occupational pension scheme, which is backed by the government and open to employers of all sizes, has enabled the UK rise up the rankings from 12th in 2011 to 10th in 2014.

"With the introduction of Nest, a simple yet sophisticated auto-enrolment scheme, the UK took an important step towards enlarging the share of people saving for their retirement," said Andreas Hilka, head of pensions Europe at Allianz Global Investors.

Hilka also praised the government's radical retirement reforms, which were announced in the budget.

The Chancellor George Osborne proposed that anyone over the age of 55 will be able to take their whole pension pot as cash from April 2015 – meaning workers will no longer have to take a compulsory annuity purchase in order to avoid a huge tax bill.

"The greater financial freedom announced in the recent Budget, removing the tax incentives nudging retirees towards purchasing an annuity may also act as a catalyst for a more efficient pension system," Hilka said.

"By allowing greater choice, retirees can choose from a far wider range of income generating products to suit their circumstances and preferences – a change to be welcomed."

The rankings also revealed that Australia, which has a two-tiered system of "highly developed" and "well-funded" pension schemes, topped the list to beat the 49 other countries.