UK retirement income trails wealthy-country average, OECD figures show

Retirement benefits in the UK replace a smaller share of workers' earnings than in most other wealthy countries, according to OECD figures examined by BBC News. The comparison comes as the future of the state pension's triple lock is debated.

How the UK measures up

The OECD uses the replacement rate, which compares a typical pension with average earnings. Its projection looks at people born around the start of the millennium on average wages and assumes pension rules as they stood in 2022. Combining the state pension with automatic enrolment in workplace schemes, UK retirement benefits after tax come to 54.2% of average earnings, against an average of 63.2% across wealthy nations.

The gap shrinks once other occupational and personal pensions, which are more common in the UK, are included. People who depend only on the state pension, however, are considerably worse off than many retirees abroad.

Spending and the triple lock

The triple lock, introduced in 2011, raises the state pension each year by the highest of 2.5%, earnings growth or inflation. As a result, the benefit has grown much faster than workers' pay, and its cost has exceeded early estimates by billions. State pension spending is expected to pass £150bn a year, making it the most expensive single benefit. Even so, the OECD finds the UK spends less on retirement benefits relative to the size of its economy than the wealthy-country average.

Andy Burnham plans to replace the current formula within a few years, linking rises to inflation or 2.5% and dropping the automatic annual link to average earnings. Increases are likely to be smaller, though the pension would still follow earnings over the long term. The OECD expects pension costs in many ageing countries to climb sharply by 2060.

A wider gender gap

Across wealthy countries, men's pension income typically exceeds women's by about 22.8%. In the UK, women's pensions are roughly a third lower, a gap largely linked to reliance on private pensions, though the latest OECD data for the UK dates from 2021. Lower pay, career breaks and part-time work all reduce the size of women's pension pots.

What it means for business readers

For employers, financial advisers and pension providers, the figures highlight how much of UK retirement income depends on workplace and private saving rather than the state. Changes to the triple lock and continued attention on the gender pension gap may increase demand for clear guidance on auto-enrolment, contribution levels and long-term retirement planning.