1st December 2015
The UK has one of the least generous state pension systems in the developed world, the latest report by the Organisation for Economic Cooperation and Development has revealed.
Its Pensions at a Glance report shows that across the OECD, the UK has one of the lowest average ‘replacement rate’ retirement incomes of the 34 countries it measures, ahead of only Mexico and Chile.
The ‘replacement rate’ is the proportion of their former working income people receive when they move into retirement.
Turkey, Russia and Greece all offer more generous pensions as the replacement rate for the average UK pensioner is just 38.3%, which means their income is just over a third of the salary they earned when still in work.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, says: “This analysis makes embarrassing reading for the politicians who have been responsible for the UK’s pensions over the past 25 years.
“The state pension was in steady decline for years and even now, is improving for lower earners but average payouts will not be rising. It is in the private sector though where the real damage has been done; the collapse in final salary pensions has not yet been replaced with well-funded alternatives.
“Auto-enrolment and the pension freedoms may help to re-engage investors with retirement saving, the challenge now is to make sure the amount being invested into pensions is increased as quickly as possible.”