UK state pension at 54.2% trails OECD average of 63.2%

The Office for National Statistics says the UK’s basic state pension will replace just 54.2 % of average earnings, well below the 63.2 % average across other wealthy OECD nations, according to a new comparison released this week. The figure is based on the pension system as it stood in 2022 and reflects the amount retirees receive after tax. It shows that, even with the UK’s mandatory enrolment in occupational schemes, those who rely solely on the state pension are worse off than many of their peers abroad.

The gap appears against a backdrop of the “triple lock” policy, which has raised the state pension each year by the highest of 2.5 %, earnings growth or inflation since 2011. While the lock has boosted payouts faster than wages, it has also cost the Treasury billions more than originally forecast. Housing costs have surged in the same period, and pensioner poverty has edged up slightly over the last decade. Yet pensioners remain less likely than families with children or working‑age adults to fall into relative poverty, defined as living on less than 60 % of a typical household’s income.

Manchester’s mayor, Andy Burnham, has pledged to replace the triple lock with a new system that guarantees at least inflation or a 2.5 % rise, but drops the automatic earnings link. The reform, slated for 2030, would likely mean smaller annual increases, though earnings growth would still be reflected over the long term. State pension spending is set to top £150 billion a year, making it the most expensive single benefit in the UK budget. By contrast, the OECD reports that the UK spends a lower share of its economy on total retirement benefits than the average wealthy country, suggesting political choices rather than fiscal constraints drive the shortfall.

If the new model is adopted, the replacement rate could stay near its current level, leaving a sizable portion of retirees dependent on private or occupational pensions to bridge the gap. Analysts warn that without additional public funding, the UK may struggle to keep older citizens out of poverty as life expectancy rises. The debate now centres on whether the government will boost public pension spending or rely on private savings to meet future needs.