UK pensioners can look forward to receiving just 29 per cent of their salary from the state when they retire – the lowest rate of any developed country, according to new research.
The Organisation for Economic Co-Operation and Development (OECD) said by the end of their careers, the average person entering the workforce in developed economies today will receive 63 per cent of their salary at retirement, while low earners will receive 52 per cent.
Turkey comes top of the table, with a net replacement rate for mandatory pension schemes equal to 102 per cent of the average salary.
However, the study also suggested the UK's introduction of the new single-tier pension, which is 30 per cent higher than the old state pension, should improve the situation, although it added it was unlikely current retirees will see a difference.
And it said the government's auto-enrolment scheme, which was introduced in 2012, has reversed the downward trajectory of workplace pension participation in the private sector, from 42 per cent of workers in 2012 to 70 per cent in 2015. In 2005, it dropped as low as 51 per cent.
But it also warned new rules on withdrawing lump sums from pensions could serve to increase inequality, because rigidity around the state pension age and the lump sum withdrawal rules mean fewer people will be able to afford to retire early.
"Furthermore permitting lump-sum withdrawals has reduced the number of annuities being taken," it added.
"While annuities, especially if overly expensive, may not be the best option, removing the guaranteed annual income that it provides could increase future reliance on the old-age safety net.
"Indeed, individuals may be inclined to spend the lump sum early or underestimate their life expectancy through the drawdown period, leaving them with limited resources at very old age."