The study concluded that, upon reaching retirement age (which will be 65 for both men and women from November 2018 and then set to rise further to 68 for both genders by 2037), Britons can expect to receive just 29 per cent of their salary in state pension. The BBC reports that only South Africa (not a member of the OECD) offered its citizens less generous funds in retirement.
And the consequences of the poor performance of the UK state pension are starting to be apparent. The Joseph Rowntree Foundation recently reported that there were 300,000 more pensioners living in poverty in 2016 than there were three years earlier, which makes it the first sustained increase for the age group in two decades.
Frances O’Grady, the general secretary of the Trades Union Congress, commented that the report acted as confirmation of what has been suspected for a long time, adding that “working people in Britain face the biggest retirement cliff edge of any developed nation”.
The OECD report once again emphasises the importance of saving up a private pension over and above state pension
However, the situation starts to look a lot better once auto-enrolment and workplace pensions are considered, because more people will be saving part of their pay.
That said, even with these schemes taken into account, the average a UK pensioner receives is 62 per cent of their working income, which is still notably lower than the OECD average of 69 per cent. What’s more, the UK still falls behind some of its European neighbours. Germany, France, Italy, and the Netherlands all have pension systems that pay out higher percentages of workers’ salaries.
Obviously, the degree to which your retirement will be affected by the low rate of state pension will be dependent on how much you’ve saved independently and what your retirement goals are.
If you’ve had a retirement savings plan in place since you commenced your career then you should be in a favourable position, but there are a number of options that could help further.
One example would be to transfer your pension pot into a self-invested personal pension (SIPP), which, when completed under the guidance of a financial adviser, can offer more flexibility and control over your savings as well as certain tax advantages. Or perhaps a qualified recognised overseas pensions scheme (QROPS) would be more suitable.
Why not speak to one of our independent financial advisers for more help and advice on expat retirement planning..
So, while it’s unfortunate, yet unsurprising, to read yet another damning report on Britain’s pension system, you don’t have to feel trapped by the it. With the right help from the right people, you can gain control over your retirement, but it’s best to start sooner rather than later..