UK state pension amongst worst in the world, says OECD
A new report from the international think tank Organisation for Economic Co-operation and Development (OECD) has revealed that the UK’s state pension is one of the least generous in the world.
The report from the OECD shows that only two OECD countries pay poorer pensions; Mexico and Chile. In comparison, countries like Turkey, Russia and Greece pay significantly bigger retirement incomes, according to the report, Pensions at a Glance 2015.
The study compared pension income to the salaries that people earned while they were working. It found that for those earning an average salary in the UK, the replacement rate was only 38.3.
This means that the average pensioner in the UK will receive just over a third of what they earned when working when they take their state pension.
The basic state pension is currently worth £115.95, but will rise to £119.30 in April 2016, as a result of the triple-lock, where pensions rise by whatever is highest; earnings, inflation or 2.5 per cent.
From April, those on the new flat-rate pension will be able to get up to £155.65, but they will need to have 35 years of National Insurance Contributions (NICs) to claim the full amount.
When private and workplace pensions are taken into account, the UK scores much better. Based on average salaries, the UK comes 15th out of 34 OECD countries for generosity. The UK’s replacement rate for all types of pension is 71.1.
In this respect, pensioners in the UK are better off than their peers in France (67.7) and Germany (64.7) and this figure is expected to improve with the introduction of the workplace pension scheme under the Government’s on-going auto-enrolment scheme.