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UK state pension is still worst in Europe

The UK’s state pension system has been rated the worst in Europe for the second year running by Aon Consulting.

The UK’s state pension system has been rated the worst in Europe for the second year running by Aon Consulting.

Its third annual European Pensions Barometer Report shows that an average UK earner retiring this year will get a state pension worth 17 per cent of their salary compared with an EU average of 57 per cent.

The report focuses on the impact and strains that pension systems place on the economy, employers and the population of each EU country.

It ranks countries by assessing demographics, adequacy of state provision, affordability and sustainability of the state pension and company pensions.

The UK has improved its overall position to be ranked fifth but the state pension is still ranked the worst.

The report says scandals, crises and legislative reaction have jeopardised the UK pension system by generating a lack of confidence among employers and individuals.

It says: “The inadequacy of the state system is beyond question, with the system showing last at almost every level of earnings. For an average earner retiring in 2007, the UK replacement rateof percentage of earnings before retirement of 30 per cent is far below the average of 60 per cent. It is the worst in Europe. Only for the lowest earners, where the Labour Government has targeted benefits, does the replacement rate start to approach other countries.”

Aon Consulting UK chief actuary Donald Duval says:
 “Migrant workers have helped boost the pension pot in the UK to mitigate against the demographic problems but this is not a sustainable measure and is a smokescreen hiding deeper issues facing the pension system.

“More needs to be done to restore confidence in private schemes to drive an increased level of contributions. People cannot afford to rely on the state pension which remains the lowest in Europe.”

Pensions minister Mike O’Brien says: “It is misleading to view the state pension in isolation. The UK pension system is different from other European countries and ranked fifth overall in the survey.

“In recent years, several European countries have had to make their state provision less generous to ensure long-term affordability. In the UK, we are reforming the system to make the state pension simpler, fairer for women and carers and more generous while remaining affordable.”

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