How the UK state pension compares: generous triple lock, but lower replacement rates and a wide gender gap

The triple lock has done what it was built to do. Since 2011, the formula has raised the state pension each year by the greatest of three measures: 2.5%, earnings growth, or inflation. Pension benefits have climbed far faster than workers' earnings over that period. Yet a harder question sits behind that record: do British pensioners actually have it better or worse than their counterparts abroad?

The domestic picture is mixed. Housing costs have also been rising fast, and pensioner poverty has edged up slightly over the last decade. Even so, pensioners remain less likely to be in relative poverty, defined as living on less than 60% of the typical household's income, than families with children or working-age people.

The cost of the triple lock has already run billions above what was first envisaged, and it is set to grow. Andy Burnham intends to introduce a new system in a few years. The state pension would rise by at least inflation or 2.5%, and the automatic annual link to average earnings would be removed. That will likely mean less generous increases, though the pension would still keep pace with earnings growth over the longer term.

To compare countries, one yardstick is the replacement rate: how generous a typical pension is relative to average earnings. The OECD models the outlook for people born at the start of the millennium, on average wages, assuming the pension system as it stood in 2022. On the basic state pension alone, UK benefits look low next to those in other wealthy countries. That holds even after accounting for the compulsory automatic enrolment of workers into occupational schemes. With both counted, UK retirement benefits after tax come to 54.2% of average UK earnings, against an average of 63.2% across wealthy countries.

Occupational and personal pensions, which are more common in the UK, narrow that gap once included. But the flip side is that people relying only on the state pension are noticeably worse off than many retired people elsewhere.

That raises the case for spending more on public pensions. The state pension bill is set to top £150bn a year, making it the single most expensive benefit. Yet OECD figures show the UK spends less on total retirement benefits, relative to the size of its economy, than the average wealthy country. Two caveats apply. First, this reflects political choices, and the UK directs larger sums to things like universal healthcare. Second, the OECD expects pension costs to soar in many nations by 2060 as populations age, with exceptions largely among countries that are making changes. The UK's projected rise is likely to be smaller under the revised triple lock, but it could still mean more borrowing. Already, £1 in every £13 the government spends goes on interest on existing debt, and countries with more generous pensions, such as Italy, have faced pressure to reform.

In one respect, the UK looks ahead of the game: automatic enrolment insists on privately funded pensions for workers. But that system produces its own problem, the gender pension gap. This is the difference between men's and women's average pension income at 65 and over, as a percentage of men's. In most wealthy countries the typical gap is about 22.8% in men's favour. In the UK, women typically receive a pension a third lower than men, mainly because of the reliance on private pensions. The most recent OECD data for the UK dates from 2021. Women are more likely to have earned less over their working lives, taken career breaks or worked part time, and the effect on pension pots can be stark.

The takeaway is practical rather than angry. The state pension has become more generous, but anyone wanting a retirement like those elsewhere will need to save, if they can and if they haven't left it too late.