13 Feb 2018
UK state pension worst in the developed world
According to Data from the Organisation for Economic Co-operation and Development, the UK state pension is the worst in the developed world.
The UK government pays out 29 per cent of average earnings, putting it at the bottom of the table for best state pensions, which is led by the Netherlands which pays 100.6 per cent, Portugal, which offers 94 per cent and Italy, which pays 93.2 per cent.
At the bottom of the table, the UK is joined by Japan, Poland and Mexico. However, the report showed that these countries still pay better state pensions than the UK.
Mexico’s is the closest, representing 29.6 per cent of average earnings. However, the next country in the ranking, Poland, pays 38.6 per cent while Japan pays 40 per cent.
The average across the OECD report is 62.9 per cent of average earnings.
A former pensions minister, Baroness Ros Altmann, said the figures in the report showed the UK’s state pension was not sustainable.
She said: “With our aging population, and a decline in traditional final salary-type pension schemes, the UK faces rising risks of old-age poverty.
“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.”
In April 2016 the government changed state pension rules so eligibility became based on National Insurance contributions. Therefore, in order to receive the full £155.65 a week, people would need to have paid National Insurance for at least 35 years.
Baroness Altmann said that despite these changes, that were implemented to make the system more affordable, further cuts might be needed.
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.”