State Pension: pensioners in Great Britain face big income shock in retirement

A study reveals Britain's State Pension is among the least generous in the world. At the same time, the Government is having uncomfortable conversations about tweaking the triple lock.

The State Pension is a crucial part of most people’s retirement planning. Indeed, for some people the State Pension is likely to be the only income they receive in their later years.

It’s no secret that, despite the successes of the triple lock, the State Pension in Great Britain is not exactly generous. However, it may shock you to see just how poorly our pension compares to those on offer from other countries.

A new study has laid this poor showing bare, suggesting that our pension is the third-worst in the world.

How we compare

Now before we jump into the findings, we should stress that it is notoriously difficult to compare the value of pensions between countries – as Full Fact points out here  – so this study is by no means definitive. 

The data comes from pension site Investing Reviews and breaks down how the State Pension in each country compares to the typical pre-retirement earnings of workers there.

The idea is that ideally, people will not see an enormous drop off in their incomes once they pack in work and instead rely on their pension.

In Great Britain, the State Pension provides recipients with little more than a quarter of the sums they may have become used to during their working lives, with only two countries providing a less generous pension.

Here’s how the top and bottom five countries for State Pension generosity shape up:


Percentage of pre-retirement earnings received in retirement


Percentage of pre-retirement earnings received in retirement





South Africa




Great Britain












As you can see, there’s an enormous gap between the most and least generous State Pensions.

Workers in Great Britain can expect an enormous income shock once they skip work, with only those in Mexico and South African seeing a larger fall.

By comparison, workers in the top five nations may not even notice much difference once they leave the workplace and head into retirement.

Our performance is markedly worse than the global average too, according to the report, which stands at 58.8%.

It’s up to you

Clearly, given how the State Pension shapes up against our regular incomes, it’s crucial that we all contribute to our own personal pensions, which can supplement what we get from the government.

That is happening far more than it used to, thanks to the workplace pension scheme which requires bosses to not only enrol staff in a pension but contribute towards it too.

A study by the Institute of Fiscal Studies last year found that over 90% of eligible private-sector workers were now members of workplace pension schemes, demonstrating just how effective it has been as a way of nudging us into starting saving for our later years.

It’s far from perfect though. Some people are excluded from the scheme due to their levels of earnings, while some of the lowest earners are being short-changed on the tax relief they should get on their contributions due to what is little more than an administrative inconsistency.

There is also the problem of self-employed workers who aren’t saving enough anyway, and who obviously do not qualify for the workplace pension scheme as they are their own bosses.

What about the triple lock?

It’s impossible to talk about the State Pension though without noting the triple lock, which has been the subject of fierce speculation of late.

The triple lock, which was introduced by the Coalition government a decade ago, guarantees that the State Pension rises each year by which is highest:  2.5%, the rate of earnings growth or the rate of inflation. 

The triple lock has done a brilliant job of boosting State Pensions over the years, but concerns have been raised over how affordable it is for the nation to maintain.

These concerns have only been heightened by the massive spike in earnings reported by the Office of National Statistics (ONS), to the point that pensioners look set to enjoy a whopping 8% rise next year.

This is largely due to the pandemic ‒ wages look to have jumped much more than has actually been the case, as this time last year wages looked artificially low due to measures like the furlough scheme. 

In recognition of this, the ONS has started publishing additional data which tracks the growth in the underlying earnings in the economy, stripping out the impacts of the pandemic. And according to that earnings really grew at a rate between 3.5% and 4.9%.

That’s a significantly lower figure ‒ a difference of around £500 a year to pensioners, according to calculations from AJ Bell.

Only time will tell if this is the approach that Rishi Sunak adopts, but won’t exactly be a huge surprise if the government elects to ditch its manifesto promise of maintaining the triple lock.

While it is an understandable move ‒ and one I think is right in the circumstances ‒ it wouldn’t make our State Pension look any better in comparison to other nations.#


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