Pensioners in the UK are suffering the worst deal of any OECD country, whereas Croatians receive 129% of their working wage. Image: REUTERS/Jon Nazca
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Pensioners in the Netherlands, Turkey and Croatia receive more than 100% of a working wage when they retire. Indeed, Dutch and Turkish pensioners get 101% and 102%, respectively, but Croatians receive a generous 129%.
That is according to the Organization for Economic Co-operation and Development (OECD), which analysed data from its 35 member countries and a number of other nations.
The data, compiled as part of the OECD’s Pensions at a Glance 2017 report, also reveals India (99%), Portugal (95%), and Italy (93%) have very competitive pension rates.
The lowest pension in the developed world
At the other end of the scale, pensioners in the United Kingdom suffer from the worst deal of any OECD country, receiving just 29% of a working wage when they retire. To put this into perspective, the OECD average is 63% and the average for EU member states is 71%.
Elsewhere, the pension rate in the United States is 49%, while in China, which is home to more than 1.4 billion people, the rate is 83%, OECD data shows.
Yet while most of these numbers seem generous, they mask a raft of more serious concerns. Improved healthcare in the developed and much of the developing world means people are living longer, and are therefore drawing a state pension for more years than systems were designed to handle.
According to data from The World Bank, retirees in the six countries with the largest pension systems are living between eight and 11 years longer – and a massive 16 years longer in Japan.
These pensions systems, in the US, UK, Japan, Netherlands, Canada and Australia, were also described as a “global timebomb” in a recent report by the World Economic Forum.
This is because these systems are expected to create a joint shortfall of $224 trillion by 2050, “imperilling the incomes of future generations and setting the industrialized world up for the biggest pension crisis in history”, the report says.
If China and India are added to statistics, the shortfall will reach $400 trillion, which is equivalent to around five times the size of the current global economy, as the image below illustrates.
“The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change,” says Michael Drexler, head of financial and infrastructure systems at the World Economic Forum.
“We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren,” Drexler adds.
Averting the pensions crisis
To combat issues, many countries, including several EU member states and OECD nations, are increasing the age at which men and women can retire.
In the UK for example, the state pension age will increase for both men and women to reach 66 by October 2020. The government is also planning further increases, which will raise the age from 66 to 67 between 2026 and 2028.
This year, the UK also made it compulsory for employers to provide a workplace pension scheme to staff aged 22 and over who earn at least £10,000 ($13,980) per year.
But experts say that raising the age of retirement won’t be enough to bridge the global pensions gap and urge policymakers around the world to consider a series of other measures too.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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