Britain’s workers can look forward to the worst state pension of any major country, according to a report by the developed world’s leading economic thinktank.

The Organisation for Economic Cooperation and Development (OECD) study calculated that a typical British worker will at retirement receive a state pension and other benefits worth around 29% of what they had previously been earning. That compares with an average of 63% in other OECD countries, and more than 80% in Italy and the Netherlands.

The report said this expected “net replacement rate” will be the lowest of any OECD country.

The UK population is ageing rapidly, has relatively high levels of poverty among the over-75s, and a much bigger problem with obesity in old age, said the OECD, with 20% of British over-80s classified as obese, compared with 15% in the US and under 10% in Italy.

The TUC general secretary, Frances O’Grady, said: “Working people in Britain face the biggest retirement cliff edge of any developed nation. We are letting down today’s workers if we can’t provide them with a decent retirement income.”

However, on some measures Britain’s pension system is performing better than many other OECD countries. The OECD noted that the new single-tier pension (currently £159.55) will be worth 30% more than the old state pension (currently £122.30) but added, “there is a long transition period and current retirees will not see a difference”.

The UK also fares well on employment rates among older adults, and with the introduction of auto-enrolment in 2012, the downward trend in private workplace provision has been reversed.

While the UK has the worst “mandatory” entitlements such as the state pension, it has a much bigger private pension system.

The OECD said the UK has $2.2tn in private pension assets, equal to 95% of GDP, one of the highest levels of private saving in the world. While the US, Switzerland, the Netherlands and Denmark had figures above 100% of GDP, in France and Germany, where state pension entitlements are much higher, private pensions are worth less than 10% of GDP.

Once the UK’s private pensions are added to the state pension, the average income in retirement for UK pensioners rises to just over 60% of former career earnings, just below the OECD average.

A Department for Work and Pensions (DWP) spokesman said: “We have taken decisive action to address our changing population through a new, generous state pension, retaining the triple lock and protecting the poorest through pension credit, reducing pensioner poverty close to historically low levels.

“But there’s always more to do. Thanks to automatic enrolment, around 11 million people will be newly saving or saving more into a workplace pension by 2018.”

Caroline Abrahams, the charity director at Age UK, said the report should serve as a “wake-up call”.



She said: “Given the current situation, the state pension undoubtedly remains a vital tool in the fight against pensioner poverty, giving millions of older people a small element of financial security in an increasingly uncertain world.

“But the government must look at how auto enrolment into workplace pensions can work with the state pension to deliver a decent standard of living in retirement for everyone.”