State Pension in the UK
The UK state pension is funded from National Insurance Contributions (NICs) which workers and employers pay. You’ll usually need at least 10 qualifying years on your National Insurance record to get any State Pension, but to get the full new State Pension of £164.35 week, you’ll need 35 qualifying years. Until 2010, women received their pensions at the age of 60 and men at 65, but this has now been equalised so that it is 65 for both men and women.
State pension ages for men and women will rise in tandem from now on, increasing to 66 by October 2020 and 67 by 2028. According to a report from the Organisation for Economic Co-operation and Development (OECD) pensioners in the United Kingdom receive around a third (29%) of a working wage when they retire, compared to the OECD average of 63%.
State Pension in the US
The US state pension is only available to citizens of the USA and is mainly financed through social security taxes paid by employees and employers. OECD data shows that pensioners in the US receive 49% of a working wage when they retire. In the USA, as in the UK, the state retirement age, known as the full retirement age, is increasing, beginning with people born in 1938 or later. People born after 1959, for example won’t reach full retirement age until they are 67. You may start receiving benefits as early as 62 or as late as 70 in the US, but people who start them before they reach retirement age will get smaller monthly benefits.
The exact amount pensioners in the USA receive depends on which state they live in, the age at which you retire and the level of workplace pensions and other savings and investments you have. However, as of May last year, the average monthly state pension benefit for retired workers was US$1,412 (equivalent to £1,068).
State Pension in Australia
Australia’s equivalent of the state pension, which is financed by tax revenues, is means tested, which means a claimant’s income can reduce the amount they receive. Australian workers typically receive around 43% of their salary on average.
The maximum basic rate pension for a single person is Australia is AUS$834.40 (equivalent to £451.60) per fortnight, or AUS$629 (£340.43) if you’re part of a couple.
You can start claiming your state pension at the age of 65 and six months, but this age is increasing by six months every two years until 2023.
As well as the state pension, under what’s known as the “superannuation guarantee” employers must make contributions of 9.5% of their workers’ gross earnings into a retirement account.
In part two of our look at how the UK state pension compares to other countries, we look at Spain, Germany and France. Find out more here.