Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • December 2015
12

UK pensions inferior to most other OECD countries

Open-access content Wednesday 2nd December 2015 — updated 5.50pm, Wednesday 29th April 2020

The UK has the third-lowest pensions in the developed world, according to the Organisation for Economic Cooperation and Development (OECD).

2

Its report, Pensions at a Glance 2015, found that average earners without a private pension had one of the lowest average 'replacement rates' retirement incomes in the developed world, ahead of only Mexico and Chile.

Replacement rate is defined as the percentage of a worker's income that is paid out as a pension income upon retirement. The UK had a replacement rate of 38.3%, meaning pensioners earn 38.3% of what they did when working, while the OECD average was 62.6%.

The report also said the amount of the basic state pension accounted for 16% of average earnings while the average in the OECD stood at 20.5%.

The basic state pension will rise by £3.35 to £119.30 a week as a result of triple lock, as announced by chancellor George Osborne during his Autumn budget statement. The new state pension, set at £155.65, should increase the basic pension for the majority of future retirees. This would amount to 22% of average earnings.

With the new state pension coming into force in April 2016, the UK is joining Ireland and New Zealand as the only countries without a mandatory second-tier pension. But the OECD said this meant future benefits would be lower than today's level for those who would have continued to contribute to the state second pension. However these will be higher for those that either opted out of, or made small contributions to, the state second pension as the new state pension is at a higher level.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, described the analysis as an "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," he said.

"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."

McPhail added auto-enrolment and pension freedoms might help to re-engage investors with retirement saving, but the challenge was to ensure that the amount invested into pensions is increased "as quickly as possible".

This article appeared in our December 2015 issue of The Actuary.
Click here to view this issue
Filed in
12
Topics
Pensions

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Life Reinsurance – Client Manager/Senior Manager

London (Central)
£ excellent + bonus + benefits
Reference
143661

Life Actuarial Analyst

South East / hybrid with 3 days per week office-based
£ dependent upon experience
Reference
143660

Investment Associate Consultant

Flexible / hybrid
£ dependent upon experience
Reference
143659
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ