UBS: UK pensions among the worst in the developed world

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16 Nov, 2017

UBS: UK pensions among the worst in the developed world

Workers in Britain can expect among the worst pensions in the developed world, according to a recent report from UBS, which drew comparisons of the retirement outlook for a 50-year-old woman in major cities around the world.

UBS calculated how much a country’s basic state pension and “mandated” pensions, like the UK’s auto-enrolment scheme and Australia’s “superannuation” scheme, would pay out as a percentage of the income of a 50-year-old “average Jane” living in a capital city.

The study found that Jane in London can expect to receive just 41% of her current income during retirement, equal to Hong Kong and just one place higher than the lowest-ranked city, Taipei in Taiwan.

Meanwhile, Singapore, Sydney, Paris and Milan ranked top of the table. UBS found Australia’s pension system was one of the most sustainable, with firms having to allocate 9.5% of a worker’s salary into a pension scheme. On the other end of the spectrum, the UK’s auto-enrolment scheme, which is loosely modelled on the Australian one, requires British employers to pay just 1% of salary, rising to 3% in 2019.

The income from an Australian “super” scheme, in addition to the country’s basic state pension, means that a 50-year-old female in Sydney can currently expect to retire at age 67 with an income of 72% of her current salary, compared with 41% in the UK’s capital.

Singapore ranked first, just ahead of Sydney, aided by its huge $346bn (£262bn) Central Provident Fund. However, UBS said average Jane living in Zurich would be better off, measured by the amount of extra savings she would have to save to finance her lifestyle in retirement.

The study only compared mandatory arrangements in each country, so private pension arrangements were not included – i.e. Only the compulsory amounts that employers must set aside, plus the income from state pensions.

UBS said Jane in London would have to save 47% of her income each month at the age of 50 if she had any chance of financing her basic urban lifestyle, assuming she had saved nothing yet privately.

They added, “This highlights that the [UK] system relies heavily on private provisions. The UK provides a good example of how starting late in life will require more sacrifice to catch up”.

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