Widespread Poverty in the Future for UK’s Youth
The Organisation for Economic Co-operation and Development (OECD) said the United Kingdom’s high levels of youth unemployment will lead to widespread poverty in the elderly when this generation reaches retirement age.
The Guardian reported that the pension schemes in place right now, which “are built on monthly contributions, will be undermined if younger workers stay unemployed for long periods.”
The OECD projects that people will live to be 100 years old and will reach retirement at 70, reported the Guardian. The OECD said “the weakness of the British state-funded system meant workers in the UK were among the most vulnerable.”
According to the OECD’s “Pensions at a Glance” report, only Mexico has a lower state pension, with an average of 28.5 percent of their working income. The U.K. has 32.6 percent, and the Netherlands top the list with 90.7 percent.
According to Express Newspaper in the U.K., workers will have to wait until they are 80 to retire with an average income of £25,500 a year. And then, Express said, “they would need to have saved nearly £350,000 almost 12 times the average pension pot of just £30,000.”
By 2050, men and women in most countries will have to be at least 67 years old when they retire. The OECD found a 3.5 year increase with men and a 4.5 year increase on average for women.
The OECD said governments need to encourage their citizens to work longer and save more money for retirement to “ensure that benefits are adequate enough to maintain standards of living in old age.”
Stefano Scarpetta, employment specialist at OECD, said it is of great concern that so any countries are building these contributory pension systems when they have such high numbers of unemployed young people who cannot save for their retirement.
On most measures, the U.K. comes in in the lower-half of the “pensions league table.” This includes public expenditure on pensioner benefits and pensioner living standards, which fall short.
The Netherlands, which tops the list of state pensions, also has the highest standard of living for retirees.
The OECD said the “U.K. had raised the average incomes of people above the retirement age and introduced plans to expand coverage through the workplace pension savings scheme Nest, which is expected to automatically enroll 10 million workers over the next three years,” the Guardian said.
The Guardian said this has a “knock-on effect of policy reforms,” which can protect the benefits of older workers, but put younger workers at a higher risk for poverty as retirees.
The OECD said many countries have “failed to construct adequate protection for low earners.”
– Alycia Rock
Sources: OECD, The Guardian, Express, Employee Benefits