UK workers ‘face big retirement cliff edge’, reveals report

PEOPLE in the UK who fail to make their own pension provision face a steep income drop when they retire compared with other OECD countries, a report has found.

Those entering the labour market in the UK and earning average amounts can expect to see their income from mandatory parts of the pension system such as a state pension to equate to around 29% of what they had been earning, compared with an OECD (Organisation for Economic Cooperation and Development) average of 63%.

The report said this expected “net replacement rate” of 29% for the UK “will be the lowest of any OECD country”.

TUC general secretary Frances O’Grady said: “Working people in Britain face the biggest retirement cliff edge of any developed nation. We are letting down today’s workers if we can’t provide them with a decent retirement income.”

The OECD said that like other countries, the UK is “ageing quickly” and the number of people aged 65 and over for every 100 people of working age will rise from about 30 today to 48 in 2050.

It said: “Already today, poverty among older people is high in the United Kingdom: among those aged 75 and over 18.5% have incomes below the poverty line, most of them women. The main reason is the low level of the pension.”

The new simplified state pension should improve matters.