Ireland gives lowest pension replacement rates
GLOBAL – Ireland is the European country with the lowest net replacement rates of pensions to incomes within the Organisation for Economic Co-operation and Development (OECD).
According to an OECD report, ‘Pensions at a glance’, Ireland and New Zealand offer pensions less than 40% of income at retirement. Ireland is closely followed by the UK, where net replacement ratio is 50%.
The study covers all mandatory pension schemes, both public and private, as well as ‘safety-nets’ for the elderly. It also takes account of differences in taxes, both across countries and includes cross-country comparisons.
On average workers in the OECD countries can expect their post-tax pension to be worth just under 70% of their earnings after tax, the report reveals, although low-income workers on half of average earnings will receive an average net replacement rate of about 85%.
The report suggests that countries Italy, Poland and Hungary have aimed to link contributions and benefits more closely. Italy with Austria, Greece, Hungary and Spain, also feature among the countries with the generous ret replacements, which is about 75%.
Luxembourg however tops the league with replacement rate for a full-career worker exceeding 100%.
But pensions for poor workers “are very low” in some countries, as in Germany and the Slovak Republic, where safety-net pensions for full-career workers are worth less than a quarter of economy-wide average earnings.
All OECD countries, however, have “some form” of safety-net for older people, usually, means-tested programmes.
The average minimum retirement benefit for full-career workers across OECD countries comes to a little under 29% of average earnings.
The average retirement age in European OECD countries is 65 for men, with countries like Belgium, Hungary and the UK embarking on gradual equalisation. France is the only European OECD country allowing normal retirement at age 60,although two-thirds of OECD member countries also have special provisions for early retirement.