The UK’s state pension offers some of the lowest income support in the G7, research shows.

Pensioners get less than a quarter (22 per cent) of their pre-retirement salary from the state pension — significantly lower than the 76 per cent in Italy, according to Fidelity International.

Marianna Hunt from the wealth management firm said that the difference reflects a very different approach 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 that in the UK it is critical to save into private and workplace pensions to secure your financial future.”

Pension systems wildly vary between countries so comparisons cannot be like-for-like. 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.

A full UK new state pension is worth £230.25 a week, rising to £241 a week in April — just over £12,500 a year. Fidelity’s figures do not take into account additional support that is available in the UK — including pension credit, council tax reduction, the winter fuel payment and free prescriptions for those aged over 60.

The UK also comes the closest to offering a healthcare system that is entirely free at the point of contact, which is more likely to be used by those in retirement. While Canada and Italy rely on the taxpayer to fund their systems, Canada has significant out-of-pocket costs.

In Germany, France and Japan, patients often have to pay something towards services, with many holding private insurance to cover costs. In Japan, those aged over 75 are automatically enrolled into a healthcare insurance system where premiums are based on their income and deducted from pension payments.

The United States has no universal healthcare system and relies on a mix of private insurance and employer-provided plans for medical costs. Many retired people have Medicare, which requires them to pay premiums, co-payments, and deductibles.

A longer, healthier retirement

Fidelity looked at three key measures — the gross replacement rate, the expected number of years getting a state pension and the percentage of government spending on old-age pensions.

The data used the most recent like-for-like comparison, the Pensions at a Glance 2023 report from the Organisation for Economic Co-operation and Development. But the amounts received are not as straightforward as in the UK, where you know you will get more than £12,000 a year if you are eligible for the full amount.

In France, your state pension depends on what you earned; it is calculated by averaging out the 25 highest earning years across your career and giving you 50 per cent of that figure up to a limit of €23,184 a year or €1,932 a month — equivalent to £419 a week.

In Italy, where payments are based on lifetime earnings, the average replacement rate is 76 per cent. So someone earning an average salary of €40,000 may expect an average pension income of approximately €576 a week.

There was also clear difference across the G7 in how long people could expect to receive the state pension. In France, it is almost 27 years, compared with just under 19 in the United States. A longer life expectancy in Japan means more than 24 years of payments, while the UK, again, sits towards the lower end of the scale at 20 years.

Alongside general life expectancy, France and Japan lead again when looking at healthy life expectancy — the number of years spent in good health after retirement. Retirees in those countries can expect to spend 16 healthy years in receipt of a state pension, compared to 12 healthy years in the UK, Germany, and Italy.

In the UK the state pension is largely funded through national insurance contributions, whereas in Italy employees contribute between 9 and 11 per cent of their salary to social security, which covers pensions and other benefits.

The UK spends less on state pensions as a percentage of GDP (6.5 per cent) than other countries, although this is rising because of the triple lock, which guarantees that it goes up every year in line with wages, inflation or 2.5 per cent — whichever is highest.

Making up the shortfall

Hunt said that UK savers face having to top up their state pensions with savings. “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.”

Fidelity found that someone aged 45 earning the £37,430 average salary and hoping to retire at 68, could add more than £22,000 to their retirement pot by boosting their contributions by 1 per cent.

Someone aged 25 earning the same salary could see their pot increase £96,300 by doing the same, because of the power of compound investing.