A report comparing pension systems from around the world has highlighted the shortcomings in UK pensions, with the UK having five times the proportion of pensioners in poverty compared to countries such as Iceland, the Netherlands and Denmark.

In its analysis, Penfold found that 15.5 per cent of UK pensioners are currently in poverty, while just 3 per cent of pensioners in countries with higher average pension contributions live in poverty.

Countries such as Iceland, the Netherlands and Denmark have robust retirement income systems that deliver good benefits and better prepare their pensioners financially, Penfold stated.

In the UK, 37 per cent of workers reported contributing 5 per cent of their income, with 31 per cent having their employer contributing the minimum 3 per cent, while in Danish workers contribute an average of 5 per cent and employers topping up an additional 10 per cent.

Therefore, Danes typically have 15 per cent of their salary going into their pension each month, compared to the typical 8 per cent for Brits.

Penfold noted that, in Switzerland, mandatory contributions increase with age, which results in 81 per cent feeling that their retirement income will be enough to live off of.

By comparison, just 38 per cent of people in the UK feel that their pension will allow them to live comfortably in retirement.

Around one in 10 workers in the UK are not enrolled in a workplace pension, while in Finland, Sweden and Israel paying into a pension scheme is mandatory.

Penfold stated that while the UK government has rewarding schemes aimed at helping pension savers, such as the 25 per cent top-up on every pension contribution made, a lack of education on pension saving means that many are not aware of these kinds of opportunities.

“Clearly the UK’s approach to employer contributions compares poorly with EU countries such as Denmark, where years of policy and regulation have shaped a different perspective on long-term saving and so employees and employers are willing to contribute more,” commented Penfold co-founder, Chris Eastwood.

“The current minimum pension contribution in the UK is simply not enough. The pensions industry and government alike need to work together to inspire a culture shift that gets people comfortable with saving more of their income for their retirement.

“Of course, the current cost-of-living crisis certainly makes changing financial behaviours hard. But we strongly encourage workers to speak to their employer or go directly to their pension provider to get an accurate understanding of their forecasted retirement income and adjust contributions if they’re able to.

“With pensions, knowledge is power and the earlier you take action the longer your money has to grow and benefit from compound interest.”

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