One of the complaints of the UK's Generations X, Millennial's and Generation Z .....
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| Robbed In Retirement ..... |
..... is that the UK's Pensioners (made up of the 'Baby Boomers' and earlier generations), get too much money and state spending instead of allowances for them.
This, despite the fact that the UK's state pension is the lowest of all the economies in the developed advanced world. According to data from the Organisation of Economic Co-operation and Development (OECD) ... the average pensioner can expect to receive from the state pension just 29% of what they earned at work. The pension systems in Japan, Germany, France, Italy, the United States, Canada, the Netherlands and Ireland all pay out a higher proportion of final working income than the UK.
Of course those lucky few on final earnings works pensions (mainly public sector workers - teachers, civil servants, town hall employees etc), will be in a far better position, but on average, even after taking into account the addition of payouts from "voluntary" work place pensions schemes, the average UK pensioner receives approximately 62% of his or her final working income. This is still lower than the OECD average of 69% ... But then again the moaning younger generations rarely let facts spoil their whining.
Not so long ago (although it feels like it was in another lifetime) I posted a story about the Russians being robbed of retirement. Well in the UK, we not only have put up retirement ages for
the receipt of a state pension, but recent figures suggest many pensioners continue to have to pay their
way long after finishing work. Royal London Insurance have produced figures that show that the
British tax man managed to extract £24bn from the 6.87 million pensioners
who pay taxes, because their meagre pensions still attract taxes, once the UK Personal Tax Allowance of £12,570 ($17,540) is exceeded.
The overall UK average the tax man takes is £3,522 ($4,914) per annum. The UK pensioner tax hotspot
is the county of Surrey which paid £961 million, which was higher than
the whole of Wales, which paid just £832 million. The highest individual
tax bills were in Chelsea or Kensington in London, where taxed
pensioners pay £32,250 ($45,006) on average.
So its the UK's baby boom generation who should feel like they have been robbed, not the later generations ...
The UK state pension is about £9,350 pa (if you have paid in for 40 yrs or more), and in 2021 the average salary was £25,971 pa, so 69 per cent of the average salary is £17,920.
ReplyDeleteIgnoring full final salary pension schemes, which as you have mentioned are rare outside if the public sector, the work place pension, would on average have to be £8,570 pa. Now that doesn't sound too much, but if you expect to live age 85, then to get that amount of index linked annual pension income, you would need at least £275,000 to put in an annuity to generate that amount. The alternative for a single person would be a drawdown pension, which would give a bigger income until the pot was empty.
Recent research shows that a lifetime of saving, the average UK 2022 pension pot stands at £61,897. With current annuity rates, this would buy you an average retirement income of only around £3,000 extra per year from age 67, which added to the full State Pension, makes just over £12,000 a year. A very basic retirement amount.
Research by a consumer group suggests that a pension pot of £154,700 (assuming it keeps growing at a rate of 3% annually), could generate a drawdown income of approximately £19,000 a year (including the full state pension from age 67), with annual drawdowns to top up the state pension.
But with an average lifetime pension pot of just £61,897 the majority of UK citizens are going to fall well short of even the £154,700 suggested as a comfortable retirement pot for a single person.
A problem brewing for the future.
Very interesting facts and figures, which if correct (ans I don't doubt that you have done your research), suggest that as you say most people will have a pension well less than the amount that they expect. I guess that there is a case for making pension pot contributions both higher and compulsory. Thanks for your insightful and interesting comment.
DeleteYour Welcome. Actually after reading this post, and checking the facts for my comment, I have reviewed my own pension position, and I will be making some changes to my own pension contributions, so as to avoid the low pension trap we have been discussing.
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