Here’s a sample of the opinions we received…
Our pensions are the lowest in Europe. How else will pensioners see a year on year increase if the triple lock is done away with. Commit to the minimum wage or raise the tax allowance?
John Ward
With the lowest state pension in Europe, now a benefit, why is the triple lock not liked, and why as it is a benefit is it taxed, no other is?
Barkus
Why get rid of triple lock when we receive one of the lowest pensions in Europe! We have worked all our lives and paid in what we were asked. Pensioners feel abused. It’s disgraceful!
Julie Rich
It’s all very well for government to complain about the triple lock but in the UK we receive one of the lowest pensions in the Western world. For the most part, pensioners have worked and contributed for 40 or 50 years. Our pension is not a benefit, it is an entitlement.
Peter Cooper
So we took a closer look.
The short answer to the question is no, the UK does not provide the smallest pension in Europe – but it might be among the smallest, depending on how you measure it.
There are a number of ways to compare the value of state pensions, but let’s start with the most common: What proportion of an average worker’s wages will it replace?
The UK’s replacement rate is 54.2%, below average for the 38 developed countries in the Organisation for Economic Co-operation and Development (OECD), according to the latest data.
But importantly for our purposes, it is greater than Germany, Poland, Switzerland and five other European nations (highlighted in light blue).
Again, the UK is below the OECD average but above nine European nations.
If we were to choose either of these two measures – the replacement rate and the amount of GDP spent – it’s important to know that pension income is calculated in very different ways in different countries.
Important differences
The state pension is, of course, just one of three retirement income pillars, besides work pensions and personal pensions, and different countries place very different emphases on each.
In some countries, contributions beyond the taxes that fund the state pension are compulsory, which is why the term “mandatory pension” is used as a catch-all term in the tables above.
For example, the vast majority of staff and employers are legally bound to make supplementary contributions in the Netherlands.
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While contributing to a workplace pension isn’t mandatory in the UK, all employers are obliged to offer a scheme and contribute a minimum of 3%, which staff are automatically enrolled in, embedding the practice in savings culture.
In other European nations with much larger state pensions, workplace pensions barely exist.
The Czech Republic only introduced employer contributions this year, while Hungary has a framework for occupational pension funds, but very few operate.
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Compare this to the UK, where 39% of pension income comes from occupational funds and 11% from personal savings, according to the latest data from the OECD, recorded in 2022.
Alternative rankings
With this in mind, let’s compare income sources for older people in OECD countries, excluding work: Public transfers (state pensions and benefits), occupational pensions and capital (personal pensions and savings).
If we rank these nations by the proportion of income received by older people from public transfers and occupational pensions combined, the picture changes.
The UK is now above the OECD average, though it remains in the bottom half of the table.
The European nations ranked behind the UK have also changed. Poland and Germany have leapt ahead, while France has slipped behind, joining four others.
Here, the UK ranks above the breakeven mark, the proportion of outgoings excluding mortgage or rent that is covered by the state pension, according to financial advisers Almond Financial.
They put the UK in the middle of the pack, ahead of 15 other European nations.
If you’re unconvinced by Almond Financial’s calculations, the UK appears in a much less optimistic position in the OECD table calculating the proportion of people aged over 65 living in poverty.
The UK is just below average, but it remains ahead of four European nations.
Why it’s such a tricky issue
While this is a good starting point and shows the UK does not provide the least generous state pension in Europe, a comprehensive comparison would have to take into account how state pensions are distributed, where things start to get textbook-level complicated.
Across Europe, the state pension is distributed using earnings-linked schemes, means-tested schemes and flat rates, or combination schemes, like the UK’s, which includes a flat rate (dependent on qualifying years) of £241.30 a week and a means-tested top-up, pension credit.
Which all means simple comparisons are not easy to do, or necessarily helpful. The range of approaches by different countries also demonstrates how difficult it is to find a system that suits everyone.
