State Pension  

UK state pension worst in the developed world

UK state pension worst in the developed world

The UK state pension is the worst in the developed world, according to data from Organisation for Economic Co-operation and Development.

As a percentage of average earnings, the UK government pays out 29 per cent, putting it at the bottom of a table which is led by the Netherlands, which pays 100.6 per cent, Portugal, which offers 94 per cent, and Italy, which gives 93.2 per cent.

The UK is joined at the bottom of the list by Japan, Poland and Mexico, but all these countries still pay better state pensions, the report by the group of developed nations showed.

Mexico's is the closest, representing 29.6 per cent of average earnings but the next country in the ranking, Poland, pays 38.6 per cent while Japan pays 40 per cent.

Germany is around the middle of the pack, paying 50.5 per cent of average earnings, just above the USA which offers 49.1 per cent.

The average across the OECD is 62.9 per cent.



% of average earnings




















OECD average


Baroness Ros Altmann, a former pensions minister, said the figures showed the UK's state pension was not sustainable.

She said: "With our aging population, and a decline in traditional final salary-type pension schemes, the UK faces rising risks of old-age poverty.

"To avoid burdening younger generations with significant tax rises, it is vital that more is done to boost private pension saving.

"Auto-enrolment is a good start but the pensions industry needs to attract more customers to pay more into their pensions."

In April 2016 the government changed state pension rules so eligibility became based on National Insurance contributions.

In order to receive the full £155.65 a week, people would need to have paid National Insurance for at least 35 years.

Baroness Altmann said that despite these changes, which were supposed to have made the system more affordable, further cuts might be needed.

She said: "Beyond the 2030s, the new state pension will be lower than the old system for most people and the lowest paid, predominantly women, will generally lose significantly from the new system.

"Despite this, the government has been advised, by its own actuaries, that the costs of paying state pensions will soar so much over the next 20 years and beyond, that further cuts could be required."

One of the possibilities would be to drop the triple lock, under which the state pension increases each year in line with whichever is the highest: consumer price inflation, average earnings growth or 2.5 per cent.

The government could opt for increasing the state pension in line with average earnings instead or double National Insurance rates for average workers, Baroness Altmann said.

Research from the Pensions Policy Institute, recently found lower-earning millennials would be most affected by scrapping the triple lock, losing up to 5.2 per cent of their retirement income.

The Government Actuary’s Department has warned the National Insurance fund – which pays the state pension and other social benefits – will run out of money around 2032.