UK pensions among lowest of advanced nations, says OECD
The UK’s state pension is one of the least generous among the most advanced economies in the world, according to a new report.
A study by the Organisation of Economic Co-operation and Development (OECD) suggests full-time workers in the UK do relatively poorly.
The report found that the average pensioner can expect to receive just 29% of what they earned at work.
Only Mexico, South Africa and Indonesia are less generous.
However, once “voluntary” pensions – such as auto enrolment or workplace pensions – are taken into account, the UK model fares better in comparison.
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Even so, the pension systems in Japan, Germany, France, Italy, the United States, Canada, the Netherlands and Ireland all pay out a higher proportion of working income.
When voluntary pensions are included, the average UK pensioner receives 62% of his or her working income. This is still lower than the OECD average of 69%.
The TUC said the government needed to improve the way the pension system works in the UK.
“The OECD has confirmed what we have long suspected – the UK is bottom of the league for pension provision,” said Frances O’Grady, the TUC’s general secretary.
“Working people in Britain face the biggest retirement cliff edge of any developed nation.”
Since 2010 the state pension has been protected by the so-called triple lock, meaning that pension pay-outs have risen by the highest of earnings, inflation or 2.5%.
However the 2.5% element of the triple lock is due to end in 2020.
A separate report, from the Pension Protection Fund (PPF), declares that defined benefit pension schemes in the UK are increasingly investing in bonds rather than shares.
That suggests such schemes are becoming much more conservative, and risk-averse.
Back in 2006, 61% of scheme assets were invested in equities. By 2017 that number had fallen to 29%.
By contrast the percentage of assets held in bonds has risen from 28% to 56%, making such investments less volatile, but less likely to grow in value.
Some experts are critical of this trend, which they say could discriminate against younger workers in defined contribution schemes.
“Of all investors in the UK, final salary schemes should be able to take the most patient, long-term view of asset allocation and investment risk, yet they have become increasingly short-term and conservative in their strategy,” said Nathan Long, pensions expert at Hargreaves Lansdown.
“This comes at the expense of the auto-enrolment generation who desperately need higher levels of contribution directed into their modern day pensions.”
Source by BBC