Only Mexicans get a stingier state pension than Brits
Only Mexicans get a stingier state pension than Brits, according to the numbers crunched by the Organisation for Economic Co–operation.
The average Brit's state pension replaces just 32.6% of their working income when they retire, while Mexicans get even less at only 28.5%.
Both nations' state pensions lag embarrassingly far behind the OECD average of 54.5% and the EU average of 58%.
Workers in the Netherlands do best, with a replacement rate of a whopping 90.7%.
The lowest-paid workers in Britain are treated more generously by the state than the highest, with a replacement rate among them of 55.8%.
The highest earners in Britain receive less than 25% of their working income from the government in retirement.
If the average working Brit is ever to aspire to the OECD average, let alone that of the Netherlands, they must contribute to private pensions, the OECD concluded.
However, it said that proposed pension reforms, including increases to state pension age and the introduction of automatic enrolment, should increase the UK pension replacement rate to the UK OECD average.
The OECD also states that Britain's "extensive private pension network, which covered over 43% of those aged 15 to 64 in 2011," was one of biggest in the OECD.
The worst pension replacement rates in the OECD
New Zealand, 40.6%
OECD average, 54.4%
The Organisation for Economic Cooperation and Development was established in 1961 to promote policies that will improve the economic and social wellbeing of people around the world. It uses a broad range of economic information and research to help governments foster prosperity and fight poverty through economic growth and financial stability and also ensure the environmental implications of economic and social development are taken into account. It can only make recommendations and has no powers of legislation; nor can it compel members to adopt any recommendation. Based in Paris, the OECD currently has 34 members, including the UK.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.