The U.K. comes last in a ranking of future gross replacement rates at 22%, finds a new report by the Organization for Economic Cooperation and Development.
The OECD's "Pensions at a Glance 2017" report analyzed the level of retirement benefits from mandatory public and corporate plans relative to earnings. For full-career workers with average earnings, the future gross replacement rate averages 53% for men and 52% for women in 35 OECD countries.
However, there is "substantial cross-country variation," said the report. The U.K. is last in the range with future replacement rates of 22% for employees starting work at age 20 today. At the other end of the range is the Netherlands, with a replacement rate just under 97%. Including voluntary plans, the U.K.'s replacement rate is 52%. The U.S. gross replacement rate for mandatory plans was 38%, rising to 71% for mandatory and voluntary plans. The OECD average gross replacement rate for mandatory plans was about 52%.
The U.K. also comes last in a ranking of net replacement rates, at 29%, compared to an average net replacement rate from mandatory retirement plans for full-career average wage earners of 63%. Turkey was on top of the range at 102%. The U.S. net replacement rate was 49%.
The report said government spending on retirement plans for OECD countries as a whole has grown by about 1.5% of GDP since 2000, although the pace of spending growth is projected to slow substantially.
The OECD reviewed and analyzed the retirement measures enacted or legislated in OECD countries between September 2015 and September 2017. It said reforms have been "fewer and less widespread than in previous years," although improving public finances "have eased the pressure to reform pension systems," said the report.
However, there have been changes to some retirement ages, benefits, contributions or tax programs for certain OECD countries. Six countries have changed the statutory retirement age in the last two years, while one-third of countries altered contributions. One-third further lowered benefit levels for all or some retirees.
The OECD called for further reforms to mitigate the impact of aging populations, increasing inequality among the elderly and the changing nature of work.
"The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed," said Angel Gurrķa, OECD secretary-general, in a statement accompanying the report. "The world of work is changing fast and policymakers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement."