LONDON, 5 May 2004 - While long term population changes look problematic, the UK currently has among the highest number of workers supporting each state pensioner, with as many as 2.6 people working for every retired person in the UK, according to latest Europe-wide research from Aon Consulting.

Entitled the Eurometer¹, Aon Consulting's latest research provides a snapshot of the current financial health of EU state pensions and ranks Luxembourg's at No. 1, with over four people (4.4) working and providing support for every retired Luxembourger. Slovakia is at the bottom end of the scale with a staggering dependency ratio of 63% (i.e. 1.6 people working for every retired Slovakian person). A summary of the table is outlined below:

NOTE: A 'pay as you go' state pension system is a characteristic of all 25 EU countries.

None of the 25 state pension schemes researched has built up reserves. Instead pension costs are allocated or levied on the active working population within each country.

This system works well when the ratio between active people and pensioners remains constant. However with reference to the UK, the birth rate has declined by nearly 20% in the last 30 years². Additionally, Government projections show the estimated ratio of people of working age to people of pension age will fall by 20% over the next 25 years and by over 30% over the next 50 years. This will translate to a fall in the working to retiree ratio of 2.05 workers to every one retiree by 2029 and 1.8 workers to every one pensioner by 2059³.

The retirement age and the unemployment rate also impact on the sustainability of any state pension system. Both sets of figures vary from country to country. Retirement age varies from the age of 55 to that of 65. For instance in Hungary, women already qualify for a state pension as early as 55, whereas in the UK the female retirement age is due to rise to 65 in line with male retirement age - from 2010.

Unemployment rates range from 2% in Luxemburg and 4.8%⁴ in the UK to a crippling 25% in Poland. Higher unemployment gives rise to a smaller employed labour force pool to pay for the pension charges.

Paul McGlone, Principal and Actuary at Aon Consulting said: "While the UK position looks favourable relative to many of our neighbours, we cannot be complacent. Changes in the profile of the population are almost certain over the next generation due to a combination of increasing life expectancy and low birth rates."

"UK citizens are increasingly aware that they have a responsibility to plan for their own retirement. The pension paid by the government may only serve as a basic provision, and over time state pension provision will place greater strains on public finances. If the UK public want to have sufficient funds to live on in old age, they need to save now - whether in a pension scheme or elsewhere - to provide that security. Both government and employers have a vital role to play in encouraging the UK public to save for retirement."

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