British pensions 'worst in Western world'

May 03 2005 by Nic Paton Print This Article

British pensions are among the most miserly in the Western world, and will mean UK workers retiring on incomes below almost all other developed nations.

A study by the Organisation for Economic Co-operation and Development has called how the UK funds retirement one of the "least generous" pensions systems in the world", ranking Britain 26th out of 30 developed countries.

A person earning an average salary of £22,000 would collect a state pension equivalent to 48 per cent of their after-tax earnings, it calculated.

By comparison, state pension schemes in most other developed nations – including Austria, Hungary, Italy, Spain and Turkey – provided 75 per cent of an employee's after-tax earnings.

Luxembourg was the most generous, with an employee on average earnings actually getting a rise in income to 110 per cent of their working wage.

The average across all the countries surveyed was 69 per cent, almost 20 per cent above the figure for British pensioners.

Average life expectancy would rise to 83.1 years for men and 86.6 years for women by 2040, added the report, further fuelling the pressure over pensions.

Various studies and financial commentators have stressed that, with the population ageing, UK workers will either have to save more, taxes will have to rise or the retirement age will have to be increased.

The Government has so far deferred any decision on making saving for a pension compulsory, preferring to wait for the outcome of the full recommendations of the Pensions Commission, due later this year.

The state of British pensions has also been a key issue in the election campaign, with the Conservatives accusing Labour of "negligence" over Britain's pensions "time-bomb".

Shadow pensions secretary David Willetts said: "This is yet further evidence of why we have to boost the incentives to save in society today.

"Under Labour, savings have plummeted. That is why the next Conservative Government will add £10 to every £100 a person saves towards their pension pot. Only by encouraging more people to save can we ease their anxieties about security."

A study last month by financial institution Friends Provident warned that British workers were "sleep-walking" into a pensions' disaster.