The UK pension system has been undermined by the relaxation of at-retirement regulation, according the 2015 Melbourne Mercer Global Pension Index.
On top of the ‘freedom and choice' changes introduced in April, the report said unfunded state pension promises, low retirement saving, an aging population and substantial government debt threaten threatened the UK's ability to deliver adequate retirement incomes.
But it said the UK system remained strong overall, and predicted its score of 65 out of 100 would improve as auto-enrolment increased levels of saving.
The report said the system could be further strengthened by re-introducing the requirement for retirees to use some of their savings to secure an income, increasing contributions and extending working lives.
Mercer senior partner and report author David Knox said: "Implementing the right reform to improve pension systems and provide financial security in retirement has never been more critical for both individuals and societies."
The UK's score of 65 is down from 67.6 last year. This leaves it in ninth place behind countries such as Denmark, the Netherlands and Australia - unchanged from last year.
The researchers gave the system a ‘B' grade but warned the UK was a whisker away from being downgraded to a ‘C'.
The report said giving people more flexibility over how to use their savings increased the risk the pensioners would run out of money in old age.
Mercer senior associate Glyn Bradley (pictured) said: "The UK's new pensions freedoms is a welcome once-in-a-lifetime change but it poses difficult challenges in ensuring that tax-privileged saving is used to provide an adequate income in the final years of life, and not exhausted in middle age.
"Annuities might be part of the answer, but they're not the only way of taking an income instead of a one-off withdrawal. We need to ensure sufficient retirement related products, guidance and incentives exist to avoid people outliving their savings."
Bradley said that low contribution rates and the lack of a "savings culture" in the UK meant the UK was unlikely to leap up the rankings.
He said: "Despite the introduction of auto-enrolment and record numbers of people in the UK enrolled in pension schemes, the UK is unlikely to make the A grade soon. 'Having a pension' is not the same as having an adequate pension. The UK lacks the savings culture of other countries and current minimum auto-enrolment contributions are unlikely to deliver adequate retirement outcomes."
"We are also an aging society, with relatively high debt, and our public sector and state pensions are almost entirely unfunded. Our pensions system has a high degree of integrity by international standards, but its low scores on adequacy and sustainability are putting us in danger of being relegated to the ‘C' league."
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