Yet how we fund our later years, and how much we'll get, has been a hot topic. The triple lock formula - state pensions increasing by the greatest of 2.5%, earnings growth, or inflation - means those benefits have risen far faster than the earnings of workers since its introduction in 2011. But as housing costs have also been rising fast, pensioner poverty has actually increased slightly in the last decade.
Nevertheless, even if you take those costs into consideration, pensioners are less likely to be in relative poverty - that is, having to get by on less than 60% of the income of the typical household - than families with children or working-age people. And funding the triple lock has already cost the state billions more than initially envisaged. With that cost set to balloon further, the debate over whether that is sustainable, or fair, has raged for a while.
Andy Burnham intends to start a new system in a few years, which would see the state pension increase by at least inflation or 2.5%, and remove the automatic annual link with average earnings. It will likely mean less generous increases, although it will keep track with earnings growth over the longer term. But are pensioners being short-changed in other ways?
How do we compare with other countries? One way of measuring that is to look at how generous the typical pension is relative to workers' average earnings - the replacement rate. The OECD considers the outlook for those born at the start of the millennium in different countries on average wages, and assumes the pension system as it existed in 2022 is in place.
On that basis, looking at the basic state pension, retirement benefits in the UK look low compared with other wealthy countries. And that is even when you consider that our system compels workers to be automatically enrolled in occupational schemes. If you consider both of those, then after tax, UK retirement benefits would be 54.2% of average UK earnings, compared with an average of 63.2% across wealthy countries.
Burnham vows to end existing pension triple lock in 2030 to help fund care State pension likely to top £13,000 a year What is the triple lock and why are people talking about it? But then there is income from other occupational and personal pensions, which are more prevalent in the UK. Include those and the gap narrows.
Extract — continue reading at the source.
