The UK’s state pension is one of the stingiest in the world, a new report has disclosed, with only Mexico and Chile paying their pensioners less.
Data released from the Organisation for Economic Co-Operation and Development (OECD) shows that when it comes to the percentage of the average wage given in retirement, the UK pays just 38% through the state pension.
The report (click here to view) also shows that the UK is tougher than the average across the 34 OECD countries when it comes to the number of years you need to pay into the system to get the full minimum benefits.
The OECD average number of years is 26 – but for the UK from April 2016, this goes up from 30 to 35 years to qualify for the full minimum pension.
Only the Mexican and Chilean governments give their pensioners less old age income as a proportion of average wages, at 28 per cent and just under 38 per cent, respectively.
In Austria and the Netherlands you would receive 91.6% and 95.7% respectively. Meanwhile Turkey pays 104.8% of the average wage in retirement – meaning you are better off in retirement than you would be in work.
Pensions are becoming harder to fund, no matter where in the world you live, and this is likely to get worse as populations get older around the world. The proportion of those aged over 65 globally is expected to rise from 8% now to around 18% by 2050, according to the OECD research.
Within the OECD countries alone, the figures are much higher, with 16% aged 65 or over now, rising to 27% by 2050.
The one thing that the UK pension system does have going for it over its counterparts is the ‘triple lock’ – where the rise in payments is linked to prices, wages or 2.5%, depending on which is higher. This, said the researchers, is unique among the countries surveyed.
However, this assumes that your pension is uprated in line with inflation. But around 560,00 UK pensioners living in countries including Australia, New Zealand, Canada and South Africa, have their pensions frozen at the rates they were at when they left the UK.
These people are seeing their spending power reducing year-on-year, and the UK Government has been reluctant to do anything about it.
The Department for Work and Pensions has published figures which show that around 2,500 expats are returning to the UK every year. Some of these are returning because they cannot afford to live overseas, according to reports. For every person that comes back to the UK there is an associated cost, not least within the NHS.
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