Research from Fidelity International has placed the UK's state pension at the bottom of the G7 rankings, with British pensioners receiving only 22 per cent of their pre-retirement income on average from the state pension. This compares unfavourably to Italy, where the figure is 76 per cent, and France, where it is up to 58 per cent.
However, the study highlights significant differences in how retirement incomes are funded and calculated across nations, cautioning against direct comparisons. Marianna Hunt, personal finance expert at Fidelity, noted that the UK state pension is funded through National Insurance contributions, whereas in Italy employees contribute 9-11 per cent of their salary to social security, which covers pensions and other benefits.
The UK state pension provides a fixed amount based on years of contributions, while France uses the 25 highest-earning years to calculate an average, with the pension being up to half of that figure. In the UK, the state pension is intended as a foundation, supplemented by private or workplace pensions, whereas in other countries it may represent the main retirement income.
Despite the success of auto-enrolment in workplace pensions, many Britons are still expected to fall short of a comfortable retirement. A Standard Life survey found that over half of respondents worry they are not saving enough, and many expect to retire at least four years later than desired due to financial pressures.
UK government spending on state pensions is 4.7 per cent of GDP, the joint-lowest in the G7 alongside Canada, compared to Italy's 12.8 per cent. Concerns have been raised that the upcoming significant rise in the state pension from April could become unaffordable without raising the pension age to 80. However, the UK benefits from the NHS, which provides free healthcare at the point of use, unlike the US, Canada, and some European G7 members.
