The think tank predicts the UK state pension will be worth 40 per cent of average pay – worse than countries such as Mexico and Chile
British workers can look forward to having the worst pensions in the developed world when they retire according to the Organisation for Economic Cooperation and Development (OECD). Only Mexico and Chile receive poorer pensions, while Turkey, Russia and Greece all pay higher retirement incomes, says the OECD’s report.
Pensions at a Glance 2015 also states the average British worker is likely to receive only 38 per cent of their salary (once state and mandatory private pensions are combined and after tax – the report doesn’t include voluntary private pension savings). This compares with above 90 per cent for Holland and Austria and above 80 per cent for recession-hit Spain and Italy. Meanwhile, Turkey pays an average pension equal to 105 per cent of wages.
Britain has also got the lowest replacement rate in the developed world, which meant UK workers saw their income drop more drastically than most other OECD countries.
After finding Britons had one of the largest gaps in the world between work salaries and retirement income, the OECD report suggests that every worker should be forced to pay into a pension.
“This analysis makes embarrassing reading for the politicians who have been responsible for the UK’s pensions over the past 25 years,” says Mark Pearson, the OECD’s deputy director of employment, labour and social affairs.
“The UK has made more reforms to its pension system of the past few decades than any other OECD country… [but] the idea it has found this beautiful balance between affordability and sustainability is some sort of Panglossian fantasy… [There will need to be] some sort of compulsory savings so that people don’t fall into poverty.”
Furthermore, the increase in self-employed people in the UK doesn’t bode well (currently more than 4.5m people in the UK work for themselves) for pensions. A recent survey reveals just one in 10 self-employed people make contributions to a private pension.
The new basic UK state pension arrives in April and will be worth £119.30, up from £115.95.