New analysis from Fidelity International highlights the crucial role of workplace and private pensions for UK savers, as the UK ranks lowest among G7 countries across three key measures of state pension generosity.
Retirees in the UK receive just 22% of average earnings from the state pension – the lowest in the G7. By contrast, other major economies provide significantly higher levels of income support.
Pension systems vary widely across countries, and comparisons are not like-for-like. Fidelity highlights a clear trade-off: the UK’s lighter tax burden contrasts with higher social security contributions in countries such as France and Italy, where state pensions are more generous. Against this backdrop, Fidelity’s analysis provides important context for UK savers.
How do G7 countries compare?
To provide a consistent benchmark, Fidelity’s analysis focuses on three comparable measures:
- Gross replacement ratio for an average worker – the level of state pension received relative to average earnings, assuming a full career from age 22. Both pension and salary figures are calculated before tax.
- Expected years in receipt of the state pension – based on the state pension age (for someone born in 1960) and average female life expectancy at age 65.
- Government spending on old-age pensions as a percentage of GDP – an indicator of the weight each country places on state provision.
The findings reveal that retirees in the UK receive just 22% of average earnings in retirement from the state pension – significantly lower than Italy (76%) and France (58%).
While in France and Italy more than 70% of retirees’ income comes from public pensions, in the UK this figure falls to just 40%, placing far greater emphasis on private saving.
State pensions across the G7: how does the UK measure up?
Source: For those born in 1960, the UK state pension age ranges from 66 to 66 years and nine months. We used the mid-year average (66.3 years). Data from OECD Pensions at a Glance 2023 and the UK House of Commons Library report Pensions: International Comparisons.
Marianna Hunt, Personal Finance Specialist, Fidelity International comments: “Italy offers by far the highest replacement rate, with an average retiree receiving around three-quarters of their working salary from the state pension. At the other end of the spectrum, the UK provides the lowest level of income support, with British retirees receiving less than a quarter of their pre-retirement salary.
“These gaps reflect very different approaches to retirement provision. In the UK, the state pension acts as a foundation or top-up, while in France and Italy it represents the mainstay of retirement income. That means, in the UK, it is critical for individuals to save into private and workplace pensions to secure their financial future.”
Healthy retirement years also limited
There are also clear differences across the G7 in how long retirees can expect to receive the state pension. In France, it’s almost 27 years, compared with just under 19 years in the US. Longer life expectancy in Japan means more than 24 years of payments, while the UK sits towards the lower end of the pack at 20 years.
It’s also important to look at healthy life expectancy – the time spent in good health after retirement. Here too, France and Japan lead the pack – retirees in these countries can expect around 16 healthy years in receipt of the state pension. While, in the UK, Germany and Italy, retirees should expect fewer than 12 healthy years of state pension and, in the US, fewer than nine.
Healthy life expectancy and years receiving the state pension
| Country | State pension age (for someone born in 1960 to receive full state pension) | Average healthy life expectancy (at age 60) | Expected number of healthy years receiving state pension | ||||
| Canada | 65 | 78.5 | 13.5 | ||||
| France | 62 | 78.6 | 16.6 | ||||
| Germany | 66.3 | 77.3 | 11 | ||||
| Italy | 67 | 78.4 | 11.4 | ||||
| Japan | 65 | 80.4 | 15.4 | ||||
| USA | 67 | 75.7 | 8.7 | ||||
| UK | 66.3 | 77.5 | 11.2 |
Source: Data on healthy life expectancy from the World Health Organisation: Healthy life expectancy (HALE) at age 60 (years)
Marianna Hunt comments: “Our research shows that it’s not just how long people live in retirement that matters, but how many of those years are spent in good health. Retirees in France and Japan can expect around 16 healthy years after starting to draw the state pension, compared with just 11 in the UK.
“Those years are when people are most likely to travel, pursue hobbies and enjoy the lifestyle they’ve worked for. For UK savers, it underlines the importance of building strong private and workplace pensions to make the most of those vital years or even retire earlier than state pension age, if possible, to enjoy as many healthy years as possible.”
How does the UK measure up overall?
Looking across three measures – replacement rate, years receiving the state pension, and government spending – the UK ranks lowest among the G7. France performs best overall, followed closely by Italy.
| Country | Gross replacement rate (%) | Expected number of years receiving state pension | Government spending on old-age pensions as a percentage of GDP (%) | Average ranking | |||||
| Canada | 5 | 3 | 6.5 | 4.8 | |||||
| France | 2 | 1 | 2 | 1.7 | |||||
| Germany | 3 | 5 | 3 | 3.7 | |||||
| Italy | 1 | 4 | 1 | 2 | |||||
| Japan | 6 | 2 | 4 | 4 | |||||
| USA | 4 | 7 | 5 | 5.3 | |||||
| UK | 7 | 6 | 6.5 | 6.5 |
Marianna Hunt adds:
“It’s important to be cautious when drawing direct parallels – every system has its own rules and funding mechanisms. . In the UK, for example, today’s state pension is largely funded through National Insurance contributions, whereas in Italy employees contribute around 9–11% of their salary towards social security, which also covers pensions and other benefits.
“The fact that the UK spends less on state pensions as a percentage of GDP compared to other countries could be seen as a positive in some ways. For UK workers, the state pension is less of a tax burden than it might be in other countries – although the cost of state pensions in the UK is rising because of the generous ‘triple lock’ guarantee.
“The key thing for the UK is that people need to be very aware the onus is on them to make up the shortfall. The good news is that, by acting early, with even small increases to contributions, people can put themselves in a much stronger position to enjoy the retirement they want.”
Few UK savers increasing retirement savings
Fidelity International’s Be Invested research finds that only 42% of UK investors plan to increase their retirement savings over the next year. Among those aged 55 and over, the figure rises modestly to 46%. While encouraging, this still leaves the majority of savers not adjusting their contributions – a gap that could present a challenge for the UK’s retirement system in the years ahead.
The power of 1%
Using Fidelity’s online ‘Power of Small Amounts’ calculator, savers can see how small changes can have a significant impact on their final retirement pot.
Based on a retirement age of 68, for a 45-year-old earning the UK’s average full-time salary of £37,430, raising contributions by just 1% could add more than £22,000 to their retirement pot. Larger increases bring even greater benefits. For younger savers, the effect is even more powerful thanks to compounding over a longer time horizon.
The impact of small increases in pension contributions
| Age | Salary (gross, full-time) | +1% contributions | +3% contributions | +5% contributions | |||||
| 45 | £37,430 | +£22,100 | +£66,500 | +£110,800 | |||||
| 25 | £37,430 | +£96,300 | +£289,000 | +£481,700 |
Calculated using Fidelity International’s Power of Small amounts calculator.
Marianna Hunt concludes: “Our research shows that the UK’s state pension provides a much lower level of income compared with many other G7 nations, which means the responsibility for funding retirement falls more heavily on individuals. At the same time, people in the UK also face fewer healthy years in retirement than some other countries, making it vital to have the financial freedom to enjoy them.
“This is where private and workplace pensions play such a critical role. The good news is that small, consistent changes can make a big difference – even increasing contributions by 1% can add tens of thousands of pounds over a working life. For UK savers, taking steps now to build stronger pension savings is the best way to make the most of their healthiest years and secure the retirement they want.”
