15 June 2007
The UK is one of just two 'rich' nations that have promised to increase average state pension payments over the next few years, with most countries seeking to cut contributions by over 20%, international research has revealed.
But pension wealth in the UK still lags behind that in many leading economies, with retirees being paid a third less than the average for member states within the Organisation for Economic Co-operation and Development.
An OECD report, published on June 8, shows that the UK and Hungary are the only states among the 16 members studied that are committed to contributing more to pension pots over the next few years.
In France, Germany, Italy, Japan and Sweden, future benefits will be cut by between 15% and 25%, while Mexico and Portugal will slash payments by over 30% as the impact of ageing populations is felt globally.
The news will provide a timely boost to UK ministers currently under pressure to cover the cost of private company pension schemes that have closed in recent years, leaving many workers without adequate retirement income.
However, the report says: 'The most modest pension systems are those of Belgium, Ireland, Japan, the UK and the United States – where pension wealth is around two-thirds of the average for OECD countries.'
The study concludes by urging individuals to save more to cover the rising costs of retirement. Around 8 million people in the UK are not saving enough and Work and Pensions Secretary John Hutton plans to introduce a system of personal accounts to provide adequate pensions for those without provision from 2012.
Under Hutton's plan, employees will be automatically enrolled into the system and will contribute 3% of their salary, while employers will pay in 4% and the government will fund 1% of contributions through tax breaks.
But the EEF, the manufacturers' organisation, this week called on the Treasury to cover a proportion of the costs that will be incurred by small firms over the first three years of the personal accounts scheme.
PFjun2007
