Britain’s state pension worst in the developed world

UK at the foot of league table, below Mexico and Chile, after replacement of earnings-related welfare

BRITAIN’S state pension is now the worst in the developed world, falling below Mexico and Chile. A worker entering the British workforce today can expect to receive less than a third of their final working salary as a basic pension after tax, according to a report published by the Organisation for Economic Co-operation and Development.

This is 40 per cent lower than those who entered the labour market in 2002 could have expected to receive as a percentage of their final salary, which was nearly half. Since the study began, the UK has consistently ranked low on the list, but it has never fallen to last position until now.

The OECD says the fall is because the Government replaced the earnings-related element of the state pension with a new flat-rate, meaning British workers who fail to make their own pension provision face a steep drop in income when they retire.

Elsewhere in the developed world, the average worker can expect 63 per cent of their salary as a state-funded pension.

Frances O’grady, the general secretary of the Trades Union Congress, said: “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 was “ageing quickly” and the number of people aged 65 and over for every 100 people of working age would 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 per cent have incomes below the poverty line, most of them women. The main reason is the low level of the state pension.”

While those who are able to save, buy their own home and put money in private pensions may have relatively good incomes, retirees without these revenues “are left with few resources,” it added.

The OECD also warned that the changes enabling older people to withdraw cash from their pension pots could lead to further inequality, as lump sums are withdrawn and people underestimate their life expectancy.

In July, it was announced that the state pension age would rise to 68 between 2037 and 2039.