/ Money

How does the UK state pension compare worldwide?

Image of a globe

Our latest Which? Money investigation looked into state pension systems in 15 different countries. Where do you think the UK sits in relation to its counterparts?

It’s extremely difficult to make a like-for-like comparison between nations’ pension schemes, as each country has different qualifying criteria and ways of calculating your entitlement.

However, despite this, our snapshot survey shows some marked differences.

Pension schemes are worlds apart

While the Swedes enjoy a maximum state pension of just over £25,000 a year, South Africans get a maximum of £1,044. And although Britain’s current basic state pension of around £5,500 a year leaves it near the bottom of the league table, government reforms will see this rise to almost £7,500 (in today’s money) in 2016.

It’s important to remember that you can’t look at a country’s state pension in isolation. How much tax people pay and what they get for their taxes are inextricably linked to the issue of pensions.

Another vital consideration is the average salary for each country. For example, a yearly pension of £1,044 in South Africa might not seem quite so low when you learn their average annual salary is £7,421.

Support for private pension saving is another key issue. Like Sweden and the Netherlands, the UK’s private pension coverage boosts its meagre state pension.

Pension ages on the up

State pension age is also a controversial subject in the UK. For many years it was 65 for men and 60 for women, but it’s increasing to 66 for both genders by 2020, to 67 by 2028 and will rise in line with life expectancy thereafter.

But the UK isn’t alone in increasing state pension age – of the 34 Organisation for Economic Co-operation and Development countries, 28 others intend to do the same.

*The state pension age may have changed since the date of publication for this article. For the latest advice and information on the state pension, check out the Which? State Pension calculator and advice guide.

Comments
AndyPandy says:
20 September 2017

One pension system for everyone in the UK should be introduced immediately if this country does not want to go bust first.
The same equitable and fair pension system for both private and public sector workers for all UK workers needs to be rolled out, and I would suggest a DC scheme is the only workable long term solution. It would save an absolute fortune, and then governments will be able to stop changing the rules every 5 minutes, and thus people might finally be able to plan for the future. Currently, a lot of people I know have been put off by the meddling and have no trust in the governments now on this issue, and so, do not save into one.
Final salary schemes have already proved to be unaffordable in the private sector, and a money purchase system for all would save this country hundreds of billions, which could solve the NHS problems and many many others, at a stroke.
The gold plated , index linked , public sector pensions are totally unsustainable , unfair and discriminatory given the massive difference in benefits, retirement ages, and don’t even start me on way the total pension pots for lifetime allowance is calculated for public sector workers. Overall it is frankly , disgusting.

iwblue says:
1 January 2019

I work in the public sector and don’t recognise anything you’ve said regarding my public sector pension. Misinformed.

LWblue – I think he ignores the way the City & Banks operate with their offshoring tax evasion etc , this country is looked on abroad as the biggest official money laundering country in the world , Edinburgh being a major city in this regard.
Notice I use the word official.
There again he is only putting forward government policy and the people voted for it.

D Juncker says:
9 December 2017

How can Spain afford the highest pensions in Europe?

It can’t. Its position is unsustainable and a major factor in the country’s current economic difficulties.

D Juncker says:
13 December 2017

It was never a big economic power but chose to give big pensions, well all I can say is they had their head screwed on right knowing that one of the lowest pension but big economy ie UK would foot the bill… no wonder brexit happened grrr 🙁

Robert says:
4 January 2018

Because it values the contributions of its older citizens and doesn’t perceive them as a nuisance and they do in the UK and currently has a GDP in excess of 3%. It also doesn’t waste money on nuclear weapons and is a net beneficiary of EU funding.

Yes Robert and the UK is expected to drop to -1.5 % GDP .This country still thinks it can win against Russia in WW 3 but realists in the forces know that is pure bull and only put out for public viewing. Many cries from top brass about conventional forces being cut back because Donald wants more out of the UK purse to purchase US arms. Have you seen the amount spent ? Meanwhile the new carrier has Windows XP and has a leak. and wont be ready for aircraft for a while yet. I didn’t mention its built to an old specification where its a siting duck for enemy radar ( Russian ) and supersonic torpedoes which will go right through most UK/US carriers. Meanwhile the IMF are laughing all the way to their OWN bank.

During 2017 or early in 2018, the Spanish State Pension system is due to run out of money. “
http://www.spectrum-ifa.com/spanish-state-pension-system-go-bankrupt/

Good to hear the new carrier has XP – I’ve always found that to be the best ever version of Windows.

HMS Queen Elizabeth is fully ready for aircraft: it’s the aircraft that are not ready for the carrier as they have not been delivered yet.

I understand that the leak is a minor problem and not uncommon in new ships during sea trials; it should not detract from the overall excellence of this vessel. People always look for the negative points I suppose.

Russia does have the highest speed torpedoes, but they are certainly not supersonic! Nevertheless, at up to 200 knots it is an extremely potent weapon.

They wont have to worry about 3 hour updates Derek even the NHS has updated .

kevin jones says:
2 December 2018

Have they run out yet

Patrick says:
15 January 2019

when did torpedoes go supersonic?????????????? thats 770mph or more, most aircraft dont go that fast…..what uk need to do is tax multinational companies there share of tax, raise minimum wage higher and faster so we get more deposible income and taxed more..

Calm – calm thats it, I should have said –Supercavitating , my fault .
– Most military aircraft go much faster than that .
I am with you on taxing multinational companies -raising the minimum wage etc but I dont see that happening this economy wants low wage /far east conditions to “stimulate growth ” –not into the economy but into the City and hence off-shore .
Example- Donald reduced taxes for US big business in the hope of it filtering down into the pockets of the poor–it didn’t .
After tonight’s vote I wouldn’t hold my breath on the future state of the economy , I listened to the debate and got the full understanding of why the DUP rejected it , I actually dont blame them under the present agreed deal with the EU/Dublin .

K.poole says:
21 March 2019

Spain isn’t the highest, Croatia is they receive 129% of the working wage, Uk receive (£141 per week) Germany receive £507, Sweden get £25000 per year Check on the OECD website. We pay our pensioners the lowest rate in the EU. If remainers insist we stay in the EU then let them start treating us as equals.

I am not disputing your figures, but are you sure you are comparing like with like?

For example, do the Swedish and German examples include an element of occupational pension?

Pension figures need to be viewed in the contexts of the tax system, benefits and allowances, non-financial assistance, contribution requirements, the cost of living, and other factors.

I am sure we would all like a higher state retirement pension but would the working population like to pay for it?

Pog says:
13 June 2019

UK foot the bill how?

Keith says:
17 June 2019

we are subsidising em

Pensions have to be paid for in some way Schemes to pay you a high pension but how many now have been closed down because they were found to be unaffordable Some have been badly managed so they are running out of money It would better for everybody if money grew on trees as some must believe it does Why not print more it is only paper ( now becoming plastic ) with money some always win but most lose

According to Modern Monetary Theory, Bishbut, printing more is not only what the government could do if it so wished, but in fact what they’ve been doing for some years It’s called Quantitative easing.

The American government has been listening to you for a long time Bishbut – printing money to pay for all those wars and bases round the world . You see Bishbut WE are the mugs that support their system by the petro-dollar etc , so really WE are paying for their economy. The American bubble is enormous , some say it wont burst but the US is in debt to eye watering $Trillions and their system is now challenged by Russia/China via local currency exchange and the petro-Yuan , dont laugh Donald and also the Democrats think its so serious that they are 2.5 minutes off starting WW3 Nuke war according to their OWN Doomsday Clock. Forget Crimea thats just a hypocritical ruse or excuse which they paid to start in the first place , namely Ukraine , as you rightly guessed its ALL about MONEY =was it ever anything else ? Get your Sayings into book form Bishbut, but the public have a hard time accepting reality .

Quantitative easing is used to buy back securities from banks to allow then to invest in other ways, and hopefully to stimulate the economy. According to this: https://www.economist.com/blogs/economist-explains/2015/03/economist-explains-5

It’s truly strange process: “To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence “quantitative” easing. Like lowering interest rates, QE is supposed to stimulate the economy by encouraging banks to make more loans.”

Depends completely on Modern Monetary theory.

I said two years ago that worthless government US bonds were passed back and forth but now its reaching breaking point in the US economy The Yuan will takeover world currency hence -war with China looming americas default “diplomact “..

Steve Austin says:
29 July 2018

One of the richest countries in the world.
Shame on you Great Britain.
Things will never change as long as all the wealth is held by the few and we give away millions to countries who send rockets in to space.
Stop pretending to be a world power and look after your own.

Derek Chestney says:
2 October 2018

Ordinary people in the private sector will never get a good pension while all the loop holes for tax avoidance are enjoyed by the wealthy.
Company’s that make prophet here then negotiate with then government as to what they are willing to pay. Most employees on pa ye have no choice it is taken before you get it .Then we have people who have paid into acompany pension have their money stolen from their pension fund.

Susan says:
22 November 2018

Why are state pension ages going up all the time ? If people were allowed to retire they would create more jobs for the unemployed and the Government would have a significantly reduced unemployment benefits bill. The state pension could then be increased with the savings on the unemployed who would then having jobs to go to. The state pension only lasts as long as the pensioner is still living, whereas some of the unemployed appear to be on benefits for life and then receive a state pension.

The state retirement pension age has been raised because people are living longer and capable of working until they are older than used to be the case. Many don’t start work and making contributions until they are 22 -24 these days either. Unemployment is currently at more or less the irreducible minimum and people who have been long-tem unemployed will not accumulate enough NI contributions to entitle them to a full state pension and they will be dependent on benefits for the rest of their lives. I doubt if retiring fit employees at 65 will open many doors for the long-term unemployed.

Well said john.

The state retirement age has been increased so that the Government can defer payments due to mismanagement of our contributions and as such we are being forced to work longer. Having worked from 15 years old until I was 62 I have paid more than enough into the system and have earned my retirement. Also my middle management job was taken by someone who was an unemployed single parent and desperately needing and wanting to work to support their family. Had I been allowed to retire at 60 this person would have been off unemployment benefits 2 years earlier.

As has been said many times in this conversation, the state retirement pension is not related to the amount you have paid in but to the number of NI contributions you have made, and the current pensions are paid for out of current government revenues from those in work.

With longer lifespans pensions need to cover more years and cannot be stretched without raising taxes and NI contributions so it has been necessary to defer the starting date. In the case of women it was also necessary to harmonise the starting date and terms with those applicable to men, and married couples’ pensions were also abolished so that everyone gets the pension in their own right to which they are entitled.

It is not rational to speculate whether your possible premature retirement would have enabled someone else to cease being unemployed as the circumstances two years previously might not have been identical, plus you would have been drawing a state pension that would have had to be paid for from current government revenues possibly cancelling out any saving.

I am not disputing what I or anyone else has put in to the system.

I will re-state that if people are not allowed to retire and the age keeps going up then fewer jobs will become available for the unemployed and unemployment benefits will continue to rise.

What is saved at the retirement end is lost to the constantly increasing unemployment end.

I understand what you are saying, SPG, but people can decide to retire whenever they like – they just won’t get a state pension until they reach the age of eligibility. Obviously some other form of income would be necessary like an early retirement pension from an employer or the use of savings or investments, or income from some more agreeable occupation.

In a well-balanced economy there is no shortage of employment. It is currently running at peak levels with the lowest number out of work for decades. Since pensions are paid for out of current tax and other government revenues, early retirement does not help as it reduces the number of people contributing while the demand period grows longer. To support a state retirement pension to the end of life the number of working people has to exceed the number drawing the pension by a considerable margin and because of increasing longevity that margin has been narrowing.

I don’t think you do understand what I am saying. If people are not allowed to retire and let their jobs go to those who are unemployed then jobs will not become available to those without work. The higher the state pension age goes then the less chance there is of anyone who is unemployed getting a job.

eg. if the bus is full then nobody else can get on it until someone gets off it.

As John said we have the lowest unemployment for years and no doubt when we leave the EU there will be even more jobs available. We live much longer, and are fitter, than when the pension was first introduced and many may prefer to remain active and earning than forcibly retired.

I wasn’t talking about forced retirement I was talking about forcing the delay of paying the state pension by increasing pension age. If people want to work then good for them but being forced to work longer to save money on pensions is wrong when the unemployed are costing the Country billions.

As I said previously, nobody is forced to work longer than they wish to, but they will have to meet the cost of keeping themselves for the period before they become eligible for a state retirement pension. An expanding economy has work for people until a later age in life and our real problem right now is not unemployment but a shortage of workers.

For the government ‘to save money on pensions’ is a myth. It is the population’s money paid through taxes and national insurance contributions. Lowering the age of retirement [thus greatly increasing the number of pensioners] would cost much more than the population would be willing to accept or the working population and employers could afford.

SPG says:
14 June 2019

It’s not about lowering the pension age, it’s about constantly raising it !!!

In an age of increasing longevity, not raising the pension age is tantamount to lowering it. To some extent the pension age has to track average life expectancy which has risen to much higher levels over recent years. Moreover, a much greater proportion of the population does not start full-time paid employment until they are well into their twenties. These factors, and many others, have a bearing on how to balance pension payments and contributions.

SPG says:
14 June 2019

Obviously, John Ward, you are living in the world of University Graduates etc. The average person has never had that luxury and does not come into that category.

To not start work until “well into your 20’s” you have either been to University or unemployed since leaving school. The latter would be because you could not get a job due to no jobs being available because pension ages are being increased all the time.

Note that I wrote “start full-time paid employment”, not “start work”. Some young people do go straight into full-time work at 18 or have already started, but a rising number don’t. Taking account of training and apprenticeships, further and higher education, gap years, and other periods out of work, many young people are not making a full contribution until their mid-twenties. Even if the average starting point is now 21, that is still three years lost contributions compared with when I started work over fifty years ago. And then men retired at 65 and women at 60 and had a pension receiving period of ten to twenty years. Despite much greater longevity, the pension age has hardly increased at all [save in respect of equalisation between men and women].

There could be many reasons why no jobs are available for someone in their early twenties – geography has a lot to do with it and a mismatch of skills and abilities with the jobs available in a particular area.

It’s all very well arguing to keep the pension age at 65 but where are the funds coming from to support that? Young people’s earnings are not high enough to bridge the gap through tax and NI contributions. In crude economic terms, taking an older person out of work who is on a higher income – and therefore paying more in taxes and VAT and making bigger NI contributions – and replacing them with a younger person who earns less and pays less NI is not efficient. Luckily we are not only motivated by crude economic approaches and try to make sure that for every young person there is a job or a training or education place to expedite their entry into full-time work. To that extent I believe that, as a group, they are favoured over older citizens, and justifiably so in my opinion.

SPG says:
14 June 2019

I don’t believe that I have just read your most disrespectful and ludicrous last sentence. Do you honestly think that the younger generation should be treated more favourably than the older generation ? What about them when they get older and find that they have to work until they are 90, even though they may have paid into the system all their working lives ?

Perhaps I misunderstood you, SPG, but I thought you were arguing that older people should be able to make way in the workplace for younger people by having access to their state pension earlier than is economically affordable.

You are right to raise the consequences of longevity. Governments have not faced up to this problem yet but it will not be long before there are far more pensioners taking out than workers paying in, and, even more critically, the longer people live the higher will be the demands on the state for health and welfare services but there will be less tax revenue to meet their costs. These consequences need to be addressed as a priority in a fair and equitable manner.

There’s an interesting debate regarding costs to the NHS and the smoking ban. In countries where no ban exists males tend to die relatively young and quickly. With smoking rapidly moving out of the equation people live longer and succumb, often slowly and painfully, to the ravages of age, which actually might be costing the NHS a lot more.

SPG says:
Today 14:28

Obviously, John Ward, you are living in the world of University Graduates etc. The average person has never had that luxury and does not come into that category.

To not start work until “well into your 20’s” you have either been to University or unemployed since leaving school. The latter would be because you could not get a job due to no jobs being available because pension ages are being increased all the time.

I believe your reasoning is flawed, SPG. John W said:

a much greater proportion of the population does not start full-time paid employment until they are well into their twenties

which is factually correct. It was the ‘full time’ aspect which makes it so. Many younger people now do not manage to attain a full time job until post-28 (Office for National Statistics), partly because so many seek HE, and because those that don’t are faced with getting a foothold on the employment ladder which involves accepting several part-time jobs.

When you attempt to relate the availability of employment to a rising pension age there is currently no evidence that this is the case. The part-time job situation has existed since 2000, and was exacerbated by the 2008 crisis.

The changes, however, were first mooted under the Tories when John Major was PM. However, the 2007 legislation only proposed rises between 2044 and 2046, so that could have not had the effect you imply.

The 2014 Act brought the dates forward, as the coalition government, at Osborne’s insistence, wanted the treasury to save money.

SPG says: 13 June 2019
being forced to work longer to save money on pensions is wrong when the unemployed are costing the Country billions.

But that’s incorrect. Two factors are at play: unemployment is at one the lowest figures for a long time, and the government’s DFM-inspired drive to make it as hard and unpleasant as possible to be unemployed have combined to make the ‘drain’ on the exchequer one of the lowest ever.

In real terms, it’s as far from ‘billions’ as you can get, with the cost of social security for the UK jobless currently standing at £95m per year.

“There’s an interesting debate regarding costs to the NHS and the smoking ban. “. I don’t know what the debate is about. Reducing smoking will allow people to live much longer but need NHS support in other ways. Just as a successful NHS has prolonged the lives of most people, but thus adding to its costs for the later-life care they need (let alone care that is provided outside the NHS).

The average male life span when the state pension was introduced was, if I remember correctly, 66.5 years. So the state (or rather, all those working) only had to pay them for 18 months. Now it is over 80; so they need supporting financially for an extra 13 years. That is not sustainable from public funds (unless we divert a lot from other demanding causes or hike taxation). We have a choice – pay more in taxes or reduce the length of time we pay the pension. Increased longevity is accompanied, for many, by extended physical and mental fitness and the ability to continue working; it seems logical therefore to raise the state pension age. But we have a choice.

SPG says:
14 June 2019

It isn’t our fault that countless Governments have chosen to re-direct our taxes and pension funds into other projects, like the Indian Space Programme etc. We have paid in all our working lives and if the various Governments had invested it where they had a return on it instead of giving it away they wouldn’t have such a massive problem now. We are one of the highest taxed and wealthiest nations in the world, with the poorest pensioners. I do realise that other EU Countries are also raising retirement ages but there pension payments are far higher than ours. ….and don’t even get me started on all the money immigrants come here and claim and all the millions that is sent to their families who don’t even live here. This Country seems to look after everyone but their own people.

Ever since the present system of a state retirement pension based on National Insurance contributions was started in 1948, the benefits [which are not only pensions] have been paid out of general taxation and other government revenue. The scheme did not start with a ready-made fund in place and 65 year-old men in 1948 received pensions without having made any contributions. It has continued on the same basis and there is no question of the money being spent on other things. If the ‘fund’ is in surplus [like now, probably] the extra money is transferred to the Treasury for other public expenditure to save the government paying interest on commercial borrowings. When the demands exceed the income in the National Insurance ‘fund’ the shortfall is funded by the Treasury to ensure there is no reduction in pensions or default of payment. As a system it works and has been remarkably reliable.

I have commented previously in this Conversation on some of the other issues you have just raised. Generally, the destination of government expenditure is a political matter and I make no comment on it, but the state pension has cross-party support and while everyone would like it to be bigger no one will say how that should be funded. It is a fact that over the last few years the incomes of UK state retirement pensioners have (a) increased faster than wages and the rate of inflation, and (b) been less exposed to taxation by virtue of higher personal allowances.

The state pension has been inadequate for many people’s retirement for decades, but we have other state benefits to help increase retirement income. Something that is a reality, but many will not face, is the only way to provide properly for retirement is through personal savings and a personal pension. The government encourages this by giving tax concessions so they effectively make a substantial contribution to an individuals pension pot. They can use this earlier than the state pension if they choose.

However, I would limit the tax relief to a single % for all, not give more to higher earners. That does not stop anyone adding more to their savings; the extra would just be out of taxed income.

We always seem to shy away from rationalising pensions; some sectors of the public service do very well, also paid for by the taxpayer. There needs to be a level playing field I’d suggest.

We could improve state pensions if we did something to address the gap between rich and poor in the UK. Whether it is due to inheritance, very well paid jobs, rising property values or various factors, some have a rather large slice of the cake: https://www.bbc.co.uk/news/business-42904875

I doubt that in a relatively free society this will change. We’ve always had huge differences in wealth. It seems even bigger gaps exist in repressed countries.

State pension will partly depend upon a country’s overall wealth – its ability to cope with the diverse demands that society makes. I think we must wean ourselves off state dependency and make our own pension provision from early in our working life, probably at the expense of more immediate pleasures like holidays, cars, entertainment…….

Income, I’d suggest, is a better measure than wealth, which for a great many people substantially lies in their home. Inflation has increased by 7x since I bought my present house; this house is worth 25 times what I paid for it, so on paper I could seem reasonably wealthy. However as I only realise that wealth if I die (even if I sell before then I need somewhere to live and as all property has gone up hugely I ‘m unlikely to get a real profit) it is only “theoretical wealth”.

Diligence and hard work are for many the best way of providing for the future (as well as the present).

The problem of inadequate state pensions could have been largely addressed many years ago by requiring everyone in employment to contribute enough to enable them to retire with a decent pension. Exceptions include those who have been unable to work for health or other valid reasons. It’s bad enough to be in a poor state of health without having to suffer a poor standard of living too. I certainly don’t wish to subsidise those who are fit to work but don’t or are profligate and spend their money on expensive holidays, cars or gambling.

When life expectancy was lower, children and young adults could benefit from inheritance, but now many inherit at a time when they are financially secure, own a house and may even be retired. No doubt there are good reasons why this is unlikely to change.