UK State Pension worst in the developed world

If you believe that your UK State Pension will be enough, it’s time to think again according to a recent study by the OECD. 

A recent study by the Organisation for Economic Co-operation and Development (OECD) has found that UK workers are set to receive the worst state pension of any major developed economy.

The typical British worker can look forward to a state pension worth just 29% of their salary. Comparatively, the Netherlands pays out 100.6%, Spain pays out 81.8%, Germany pays out 50.5%, the USA 49.1% and Poland 38.6%.

When it comes to retirement age, it’s also predicted that British workers will have to wait even longer until they qualify for their state pension in the future. The current UK state pension age is 65 for men born before 6th December 1953 and between 60 and 65 for women born between 6th April 1950 and 5th December 1953.

However, data published by the Government Actuary in October 2017, implies that UK state pension age will be 70 by the 2050s and 71 by the 2060s. This means that anyone currently aged 30 or below will not get their state pension until they are 70 and anyone currently aged 20 or below will need to wait until they are 71.

Ageing population and traditional pensions

The fact that people are now living even longer is one of the main reasons for the UK falling to the bottom of the global pensions league table. The number of people aged 65 and over for every 100 working people in the UK, is predicted to rise from 30 today to around 48 in 2050.

On top of this, there has also been a decline in traditional final salary-type pension schemes which has led to increased poverty amongst the older generation in the UK. Today it’s thought that 18.5% of older people currently have incomes that are below the poverty line.

Start protecting your future now

These shocking findings highlight the fact that it’s now more important than ever to accumulate your own provisions for retirement. Relying solely on a state pension, is a common retirement planning mistake that we covered in our previous blog: ‘Avoid these 3 pension pitfalls.’

Whilst you should ensure that you are utilising your UK state pension, there are further steps you can take that will allow you to live the life you want at retirement.

A personal pension is a great way to build an additional pot of money for retirement that is also tax efficient. You may also want to consider paying more into your workplace pension scheme or delaying when you start taking your retirement income. Tax relief of up to 60% is available depending on your personal circumstances.

To discuss the best way to increase your income in retirement, call the pension specialists at Innes Reid on 01244 347583 or email us at: info@innesreid.co.uk

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