When looking at pensions across the world, the UK is typically ranked as one of the worst places for somebody to retire.
However, new data has shown Britain’s pension system to be above average and ranked in the global top 10.
When looking across private and state schemes, based on measures of adequacy, sustainability and integrity, Britain ranks higher than average at an overall score of 73, compared with a typical 62.9.
Britain often ranks poorly in international comparisons when the state pension is looked at in alone.
However, a brighter picture emerges from a global pension index compiled by actuarial firm Mercer, which took holistic survey scores across different categories.
As well as the state pension, retirees can also get extra cash from their workplace pensions due to autoenrollement.
Employers must contribute at least three percent of each employee’s salary into their pot, while the employee usually contributes at least five percent.
Workers’ contributions benefit from tax relief at their highest tax rate and any investment growth is tax-free. For example, a taxpayer in England who earns £55,000 a year will pay 40percent tax on income above the higher-rate tax threshold of £50,270, or on around £5,000 of their earnings.
If that worker makes a £10,000 pension contribution in a given year, 40percent tax relief will be due on just under £5,000 and 20 percent relief on the rest.
The Netherlands tops the Mercer ranking with a score of 85. Dutch retirees receive a flat-rate state pension and most workers are enrolled in a workplace pension scheme. Dutch employers famously use “collective defined contribution” schemes. Unlike with a defined benefit scheme, members’ retirement income is not guaranteed, but savers instead put their money into one collective pot.
This allows the pension fund’s managers to spread longevity and investment risk across all the members and contrasts with the more common “defined contribution” schemes, under which each worker bears all the risk for his or her pension income.
In Britain, Royal Mail is launching a new pension scheme similar to the Dutch model and will enrol 150,000 workers from next year.
Iceland came second at 83.5. There, retirees receive a basic state pension and also save into mandatory private pension schemes at work. Denmark followed at 81.3; it also has a basic public pension scheme as well as a means-tested supplementary benefit. The Danish also save into workplace-defined contribution schemes.
DWP urges pensioners to check eligibility for five key winter schemes[LATEST]
Growing numbers stay on working past 65 years new figures reveal[INSIGHT]
Full list of State Pensioners who could get £6,552 in backpayments in 2023[ANALYSIS]
- Advert-free experience without interruptions.
- Rocket-fast speedy loading pages.
- Exclusive & Unlimited access to all our content.
Overall, Britain ranked 10th globally. The amount of money one may get is based off of their National Insurance contributions.
The state pension age is currently 66 for both men and women n, although it is rising to 67 and is due to rise again to 68 in the 2040s.
To get the full state pension, Britons must have 35 years of National Insurance contributions and 10 for any state pension at all.
Mercer suggested that the British system could be improved by raising the minimum retirement income for low-income pensioners, helping the self-employed to save more into their private pots and increasing contribution levels under auto-enrolment.
France scored worse than Britain, ranking 25th with an index score of 61.7, thanks in part to a low score for sustainability. Mercer said the system could be improved by getting older people to stay in work for longer.
However, more than a million French workers took to the streets earlier this year to protest against plans to increase what is one of the lowest retirement ages in Europe.
Under the new proposals, citizens would have to reach the age of 64, instead of 62, and have 43 years of work under their belt by 2030 to earn a full state pension. It would mark the first increase in the French retirement age in more than a decade. It rose from 60 to 62 in 2010.
The lowest scores were for India at 45.9, the Philippines at 45.2 and Argentina at 42.3.
Source: Read Full Article