The UK has the worst basic state pension in the developed world (defined as full OECD membership).
In 2018, it was only worth 28.4% of average income at retirement (based on the net replacement rate or the basic state pension).
The EU average percentage is more than double that of the UK pension.
The only country who’s data was compared by the OECD to pay a lower net replacement rate percentage is South Africa. A country which is not yet considered a developed nation and has the highest rates of inequality in the world, with more than half the population living in poverty.
For context, the SNP’s Social Justice and Fairness Commission has recommended that, following independence, the basic state pension will be raised to match the UK New State Pension which is paid only to recent retirees. So, they have stated that most Scottish pensioners should get pensions increase in an independent Scotland from £137.60 per week to £179.60 per week. That’s a significant increase but we think it’s not enough and our campaign aims to convince The Scottish Government to pay the Real Living Pension.
Research by the OECD found the UK has the worst basic state pension in the developed world (defined as full OECD membership). In 2018, it was only worth 28.4% of average income at retirement (based on the net replacement rate). The House of Commons Library confirmed this stating that ‘the UK has a net replacement rate of 28.4 per cent from mandatory pensions for an average earner, well below the OECD average of 58.6 per cent and the EU average of 63.5 per cent’.
When you include voluntary provisions which are only an option for the beter off in society, the UK’s new replacement rate rises to 61% compared to the EU average of 67% but the OECD designates those as voluntary. Let’s be clear, we are arguing for the basic state pension as provided by the Government to be raised and the counterpoint that many people have private or in work pensions is completely irrelevant.
People who retired before the New State Pension and before the opt out company contribution scheme came into force don’t get anywhere near the EU average. The lower replacement rate also applies to people who have experienced long terms of unemployment, carers (mostly females from less well-off sections of society), people with disabilities or long-term illness and those experiencing in-work poverty (not receiving the Real Living Wage) have been let down by successive Westminster Governments of all colours.
The fact that polititians from Westminster parties to claim that the 28.4% figure is irrelevant because it doesn’t apply to the wealthy, simply shows how ignorant of the needs of pensioners they are.
Progress towards matching the European average will have to be achieved through a staged process. We are calling on the Scottish Government to commit to an instant increase in the state pension (in an independent Scotland) to £200.00 a week and then to implement a staged plan of rises till pensioner poverty is eradicated. We have calculated the basic amount a pensioner requires to live with dignity, to afford the right food and to be able to heat their homes is £200 a week – its not enough but it is a start.
More than 12 million pensioners will be hundreds of pounds worse off, as incomes fail to keep pace. In total, £187 will be wiped off all pensioners’ yearly income if inflation remains at its current level, amounting to nearly £5,000 by the time they reach age 85.
Independence will lift the weight of the UK Governments generational economic mismanagement from Scotland and as our economy grows we will be able to continuously improve the state pension over time until reaches an acceptable level.
Independence is the only realistic option if you want to protect pensions and end pensioner poverty. Only through independence can we afford to end pensioner poverty, as its the cost of being part of the UK that is holding our economy back.
Believe in Scotland is the community for people who live in Scotland and who believe that Scotland’s future should be decided by the people of Scotland. We are also Scotland’s most active, most effective, and most successful independence campaigning group.
We support independence, not for politics but for the people, as a means to an end of building a better Scotland.
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That’s the Believe in Scotland pledge – if you believe, then get involved and pledge your support for the grass roots led campaign for Scottish independence and get a free PDF version of the book Scotland the Brief that explains everything you need to know about Scotland economy. We will also email you key messages, exclusive content and campaign information.
NOTE 1: Developed world as defined by membership of The OECD. Collins English Dictionary. Copyright © HarperCollins Publishers: Noun : the industrialized and economically advanced countries of the world collectively – Also called: First World, global north.
Note 2: The net replacement rate is defined as the individual net pension entitlement divided by net pre-retirement earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners. It measures how effectively a pension system provides a retirement income to replace earnings, the main source of income before retirement. The aforementioned definition is from the OECD website.