UK state pension ‘least generous in the developed world’

February 14th, 2018

The UK state pension is the “lowest in the developed world”, according to the latest OECD figures that display a comparison between the more generous state-funded pensions and the least.

According to the data, the UK is at the bottom of the global pensions league table, with the least generous state provision.

As a percentage of average earnings, the UK government pays out 29%. Comparatively, the Netherlands pays out 100.6%, Spain pays out 81.8%, Germany pays out 50.5%, the USA 49.1%, and Poland 38.6%.

Former pensions minister Ros Altmann said the combination of an ageing population and a decline in the traditional final salary-type pension schemes, the UK faces rising risks of old-age poverty.

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.”

Altmann said that, although the UK state pension is the lowest in the developed world, it will need to be cut further to avoid “massive tax rises”.

“The options could include dropping the triple lock, and increasing state pension in line with average earnings instead, or possibly doubling National Insurance rates for average workers,” she added.

Meanwhile a spokesperson from the Department for Work and Pensions said: “As pension systems vary significantly around the world, it is difficult to draw meaningful comparisons.”

“The UK state pension provides a firm foundation for people to build their private pensions savings on and we support people on the lowest incomes through a range of social security benefits, reducing pensioner poverty close to historically low levels.”

Under-30s To Work Into Their 70s

Meanwhile, data published in October by the government actuary suggested state pension age will be 70 in the 2050s and 71 in the 2060s, meaning anyone aged 30 or below will not get their state pension until they are 70, and those age 20 or younger will have to wait until they are 71.

Altmann continued: “We are one of the world’s leading economies, but our support for the oldest in society is not fit for purpose. Even though most people will receive the lowest state pension in the developed world, the costs of providing for our aging population have not yet been brought under control.

“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.”

 

Source: Professional Adviser