Modernity has notably enhanced longevity across the globe, albeit recent years have witnessed a slight reversal of this trend in countries such as the US and the UK. Consequently, a longstanding argument championed by many liberal governments across Europe has been to raise the age at which individuals can claim a state pension, positing that this adjustment is necessary to accommodate the longer life expectancy.

Nevertheless, the situation is far more nuanced, particularly when considering the Healthy life expectancy (HALE) for manual and industrial workers. With a significant proportion of pensioners in the UK living below the poverty line (13.1% in the UK vs 4.4% in France), it becomes pertinent to compare the British pension system with those of other European nations.

To conclude this introduction, it is worth noting that any comparison of retirement systems is delicate. Indeed, some (like in France) are based on a solidarity system where working generations pay for their elders through various funds managed either by the state or by workers; other systems are solely managed by the state, offering a minimum pension; and additionally, some countries (such as the United Kingdom, for example) have developed pension funds that allow more affluent workers to build up a supplementary pension and offer the possibility of retiring before the official state retirement age. The private pension funds won't be specicially considered in this article, but play some role in the average income pensioners may expect at retirement (including the poverty level of pensioners).

The UK’s State Pension

Pension income protection can be attributed to the triple lock announced by the Coalition Government in its first Budget after the 2010 election. It was implemented from the 2011/12 financial year.

What is the triple lock?

The triple lock guarantees the pension amount increases to keep up with the highest of September’s inflation rate, earnings growth or 2.5% -- whichever is higher.

The Chancellor announced in the Autumn 2023 Statement an 8.5% increase in the State Pension for April 2024 because September's inflation rate was only at 6.7% and annual wage growth was at a high of 8.5%. This is aligned with the principles of the triple lock. Pensioners will receive £221.20 per week in April 2024 (£958 per year) – up from £203.85. Last year, the September inflation rate was 10.1%, meaning pensioners received a whopping 10.1% increase in their pension earnings in April.  

At what age are you eligible to claim a UK state pension?

Currently, the state pension age is 66. Individuals born after 5 April 1960 will be eligible at age 67. As with many countries, the UK will also gradually increase the pension age between 2034 and 2036 to 67 with a further jump to the age of 68 between 2044 and 2046 according to the government's plans.

How is an individual’s UK state pension calculated?

The state pension amount a person is eligible for relies on the years they contributed to the National Insurance (NI) and the year they achieved the State Pension age. The latter is further subdivided into those individuals reaching pension age before April 6th 2016 and those either on this date or after.

For the present tax year 2023-2024, an individual can either receive £203.85 under the new state pension rules or the basic state pension of £156.20 if they are not eligible for a State second Pension, depending on certain criteria. In order to receive the full amount of State pension, it is necessary to have contributed for 35 years.

What is the cost of living in the UK?

Pension advisors have placed the average monthly cost of living, excluding rent, at £688.04 per month per person. If an individual receives the maximum UK state pension per month of £802.32 it only leaves them with an excess of £114.28 each month. However, as the cost of living increases this small buffer is not expected to be sufficient.

“Closer to home, the UK has a system that is just above the breakeven point which means at present, there isn’t much room to manoeuvre for those battling the cost of living crisis. And while it is positive that the UK finds itself among the top half of countries, for how much longer is the question. While the increase in State Pension in line with inflation is needed and welcomed, it’s clear that those over 66 need to look at other options rather than just relying on the State Pension.”--Sam Robinson, principal financial advisor at Almond Financial

Spain is are the most generous European country for pensioners

Other European countries are also following the trend of increasing the state pension age. The French recently pushed through an age increase from 62 to 64 resulting in widespread riots nationwide (although it also depends on the number of years of work required to claim full pention, currently 43 years, which means that in effect a large part of the population cannot claim their pension before 67).

Pension advisors used Numbeo data to rank countries that have the most to offer pensioners in terms of cost of living and found the UK ranking almost halfway at 16 on the European Pension Breakeven Index– just a tad above the breakeven mark for pension income. The cost of living cost looked at an average of general expenses like food expenses, utilities, etc but excluded any rental or mortgage expenses.

The country at number one was Spain on the European Pension Breakeven Index. The Spanish pension system was the most generous with the maximum pension receivable being €2,617.53 per month (£2,287.24). The average cost of living in Spain is relatively low leaving pensioners a massive 407.40% over the breakeven point.

Belgium ranked at number two. Their maximum monthly pension was €3,100 (£2,709.93) per month for long-term workers. The cost of living is higher in Belgium compared to Spain but pensioners still come out on top having a comfortable surplus to live well.

Luxembourg is in third place with a monthly state pension of £3,050.57 with a living cost of £847.32 and 360.03% over the pension income breakeven point.

France made an appearance at number seven because it has a monthly pension payment of £1,497.73 and an average cost of living at £751.31 which brings it to 199.35% above breakeven.

At number 15 on the list is Ireland with a monthly state pension of £962.08, an average cost of living of £765.87 and 125.62% over the income breakeven point.

On the other side of breakeven is Sweden at number 17 with a pension payout of £705.63, and a cost of living of £709.01 taking it slightly below the breakeven point of 99.52%.

At the bottom of the list is Georgia at number 29 with a pension of £82.34, monthly cost of living of £477.03 and 17.26% below breakeven. At ranking 30 is Armenia with a pension of £67.79, and cost of living at a high £506.81and this makes it 13.38% below the breakeven point.

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