The countries with the best (and worst) state retirement incomes

With millions of Brits surviving on a pitiful State Pension during a cost of living crisis, new research reveals the countries with the most (and least) generous retirement incomes.

Despite an 8.5% increase in State Pensions this month, many UK retirees face an uphill battle to make ends meet.

And while the full Basic State Pension rate has risen to £11,502, a stealth hike in Income Tax also means that 1.6 million more pensioners will be paying Income Tax by 2028.

But do those in other parts of the world fare any better in their golden years?

To find out how the UK system compares to its global counterparts, Money Mail and pensions firm Aon investigated the benefits available in major European countries, the US and Australia.

How the UK compares

It will come as no surprise to cash-strapped Brits that the UK came bottom of the rankings, with a maximum possible State Pension Income of £958 per month.

At the other end of the scale, pensioners in Spain can receive a far more generous £3,060, which is more than three times higher than the UK.

Below is a list of how eight of major economies compare, ranked according to the maximum possible state-backed pension income.

Source: Money Mail/Aon/OECD

Everything you need to know about pensions

1. Spain

With sandy beaches, paella and sangria, Spain already feels like an ideal place to spend your retirement years.

On top of this, pensioners can receive a maximum monthly income of more than £3,000 from the state, which is easily the most generous of the nations included in the research.

Interestingly, it’s also significantly higher than the average UK monthly earnings, which currently stand at £2,331.

Payouts are based on the amount people earned and increase in line with inflation every year.

2. The US

America places second in the rankings, with retirees eligible for approximately £2,880 per month from the state, provided they’ve contributed into the system for a minimum of 35 years.

The maximum amount pensioners can receive in retirement is based on their income during their working life.

Bear in mind, America also offers less in the way of state-funded healthcare and most US citizens rely on private insurance to fund their medical treatment.

The state does, however, fund a Medicare system for those 65 and older, which can help cover the cost of hospital stays and prescription drugs.

How much you need to save for a comfortable retirement

3. Germany

The country offers a maximum state-backed retirement income of £2,140, with payments based on in-work earnings.

To receive a full pension, retirees will need 45 years of contributions.

As the Money Mail research points out, retirees are eligible for pension payments if they have made five years’ worth of contributions.

In contrast, those in the UK need to have contributed for at least 10 years to be eligible for any State Pension at all.

4. Denmark

Denmark, which recently placed second in a ranking of the world’s happiest countries, has the fourth most generous state-backed retirement income.

With monthly payouts of £1,661, pensions rise in line with average earnings every year.

Although the pension age is currently 67, this is set to rise to 69 by 2035.

Unlike many other countries, the level of pension payouts isn’t linked to in-work earnings and is means-tested on retirement.

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5. France

Steeped in romance and with some of the world’s finest cuisine, France is a dream retirement destination for many.

With a maximum monthly income of £1,570, pension payments rise in line with inflation each year.

Although the pension age is currently 62, it is set to rise to 64 over the next six years.

These increases will take place incrementally, rising by three months every year until 2030.

6. Netherlands

With a maximum state-backed retirement income of £1,230, the Netherlands came in third from bottom.

In positive news for those on a low income, however, the amount pensioners receive is based on a flat rate and isn’t tied to in-work earnings.

As payments are linked to the minimum wage, they are reviewed every six months.

To qualify for income from the state, pensioners need to have lived or worked in the country for at least 50 years.

7. Australia

While Australia is often seen as a perfect spot for Brits looking to start a new life abroad, the country came in second to last in the ratings.

With maximum monthly earnings of £1,110, the pensions system is means-tested based on income and assets tests.

The country’s ‘double lock’ system means that pension rises are tied to either average earnings or inflation.

How much the State Pension pays in 2024

8. The UK

With a maximum possible income of below £1,000, the UK has the stingiest State Pension of all the countries included in the listings.

However, as the Money Mail’s research points out, its yearly increases are more generous than some other countries, thanks to the government’s ‘triple lock’ on pensions.

This guarantees that payments will grow in line with inflation, average earnings or by 2.5%, whichever is greater.

And despite having the lowest pension payout, retirees in the UK will only need to contribute into the system for 35 years to receive a pension (which is the joint shortest period on the list).

On top of this, pensioners on a low income can apply for Pension Credit, which is a means-tested benefit for those on a low income.

It guarantees a minimum weekly income of £218.15 for single people and £332.95 for couples.