UK pension provision falls below wealthy-country average, BBC reports

The UK state pension provides less retirement income than the average across wealthy countries when measured against workers’ earnings, but workplace and personal pensions narrow the gap, BBC News reports. The comparison highlights how much retirees’ incomes depend on savings beyond the state pension — and how unevenly those savings are shared.

The OECD comparison looks at people born around 2000 on average earnings, using pension systems as they stood in 2022. After tax, the UK’s state pension and compulsory workplace-pension provision together would replace 54.2% of average earnings, against a 63.2% average across wealthy countries, according to the BBC’s account of the figures.

The gap narrows when voluntary occupational and personal pensions are included, which are more common in the UK. But people who rely mainly on the state pension are worse off than many retirees elsewhere. The figures describe a modelled comparison, not the income every pensioner receives.

The state pension has risen under the triple lock, which increases it each year by whichever is highest: inflation, average earnings growth or 2.5%. The BBC says this has lifted pensions faster than workers’ earnings since the policy began in 2011, while pensioner poverty has edged up slightly over the past decade as housing costs rose. Pensioners are still less likely to be in relative poverty than working-age people or families with children.

The gap between men’s and women’s pensions

The BBC also highlights a substantial gender gap in pension income. OECD figures put the UK gap at 36.7%, compared with an OECD average of 22.8%. The UK figure is for 2021, the most recent year available in the comparison; the other country figures are for 2024. The gap measures how much lower average pension income is for women aged 65 and over than for men of the same age.

Women are more likely to have had lower pay, career breaks or part-time work, all of which can reduce pension savings. The BBC says the UK’s reliance on private pensions is a major factor in the gap.

The comparison comes as Prime Minister Andy Burnham plans to replace the triple lock from 2030 with annual increases of at least inflation or 2.5%, removing the automatic link to earnings growth. The BBC says the change is expected to mean less generous increases, while keeping pace with earnings over the longer term.

Spending on the state pension is set to exceed £150bn a year, the BBC reports. Yet the UK spends a smaller share of its economy on total retirement benefits than the average wealthy country. The BBC points to competing public-spending priorities, including universal healthcare, and to the challenge of ageing populations. Its account says the OECD expects pension costs to rise in many countries by 2060, while more generous systems such as Italy’s have faced pressure to reform.