UK ranks bottom for state pension in developed world


15 Feb, 2018

UK ranks bottom for state pension in developed world

With a basic payout of £122.30 per week, the UK’s state pension is “the lowest in the developed world”, with a former pensions minister warning that the situation could get worse for future British retirees.

Despite being one of the world’s leading economies, recent figures compiled by the Organisation for Economic Co-operation and Development (OECD) sees the UK lagging far behind the rest of the developed world in terms of state pension benefits for their citizens.

In fact, the OECD ranked the UK last in the global pensions league table for developed nations. A full state pension in the UK is equivalent to just 29% of average earnings, even lower than less economically developed western nations such as Chile at 40.1% and Poland which pays out an equivalent to 39% of average earnings.

On the opposite end of the scale is the Netherlands where payments for state pensions are actually marginally higher than average earnings at 100.6%. They are followed by Portugal and Italy at 94.9% and 93.2% respectively. Europe’s largest economy, Germany, pays out 50.5% whereas other heavy weights from the European Union such as France pay out 74.5%.

As reported by Hannah Godfrey in the Professional Adviser, former pensions minister Ros Altmann says that a combination of an ageing population and a decline in the traditional final salary-type pension scheme could see the situation deteriorate further, with the UK potentially facing risks of old-age poverty. 

Regarding the figures from the OECD, Altmann commented: "In April 2016, major reforms to the UK state pension were supposed to have made the system affordable for the future, reducing its generosity," she said.

"Beyond the 2030s, the new state pension will be lower than the old system for most people and the lowest paid, predominantly women, will generally lose significantly from the new system.

"Despite this, the government has been advised, by its own actuaries, that the costs of paying state pensions will soar so much over the next 20 years and beyond, that further cuts could be required".

Altman also warned of recent Government data published in October, which indicates that anyone aged 30 or under will not receive state pension benefits in the UK until they are 70.

Altmann continued: "We are one of the world's leading economies, but our support for the oldest in society is not fit for purpose.

"To avoid burdening younger generations with significant tax rises, it is vital that more is done to boost private pension saving. Auto-enrolment is a good start but the pensions industry needs to attract more customers to pay more into their pensions".

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