In the UK the gap between income earned during working life and pension paid out during retirement is greater than that of all other developed countries.
While retirement earnings in the UK are low, the country has been praised for offering people access to diversified retirement pension income streams made up of both state and private benefits.
Addressing delegates in the opening session of the Employee Benefits Pensions Summit 2010, which kicked off at the Pennyhill Park in Surrey today, Edward Whitehouse, head of pension policy analysis of the social policy division at the Organisation for Economic Co-operation and Development (OECD), said that the best way for countries to deal with risk and the increasing impact of an ageing population is to maximise both private- and publicly-funded pension provision as the UK has done.
Whitehouse said that while other countries’ pension reforms hit lower earners, increases in the UK’s pension replacement rate had favoured the economically disadvantaged rather than those on high incomes.
He acknowledged that the UK was not immune to the impact of an ageing population but also pointed out that, in comparison to other OECD countries, pensions were less of a financial burden on the state.
“Even though we are going to have a lot of population ageing, the increase on public expenditure is not huge in the UK,” he said. “It doesn’t even get to 10% of GDP so it’s a lot easier for the government to finance.”
Overall he said the UK compared favourably when it came to private sector pensions with just over 47% of people covered by occupational pensions, compared with 34% in Canada.
This could present different challenges when it comes to the introduction of auto-enrolment and national employment savings trust (Nest) than those experienced by New Zealand, where a very small proportion of the population was covered by occupational pensions before the implementation of its state-mandated pension provision, which used auto-enrolment.
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