Stuart Price, Partner and Actuary at Quantum Advisory, has warned that if the current pension system in the UK doesn’t see significant changes in the near future, the country could face a ‘huge social welfare problem’.
The warning comes following the latest report from the Organisation for Economic Co-operation and Development (OECD) which shows that if relying solely on the State Pension, British retirees face the steepest income drop when they stop working compared to any other OECD country. The report found that when Brits gave up work their income would roughly fall to just 29% of their usual earnings compared to the cross-country average of 63%.
Stuart said: “The results of the OECD report aren’t surprising at all. This is a problem that has been incubating for some time and should now be at the forefront of the Government’s agenda.
“The intergenerational gap is widening when it comes to pensions. The issue is, people in retirement or close to retirement were generally afforded generous defined benefit schemes from their employer, which has meant they are able to live comfortably in retirement. The generation in work now, do not have this luxury and invest in defined contribution schemes, which often receive limited contributions from the employer who is still paying for the defined benefits pensions of the older generation.
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